Senate Standing Committee on Environmental Quality

Good morning. We are now calling to order the Senate Committee on Environmental Quality. We do not have a quorum yet, so we will start as a subcommittee. I do see our first author here, Senator McNerney. So, we will begin with SB 872. You're welcome to come forward and begin when ready.

Good morning. I'm pleased to be here to present, SB 872. The first comment is that we will be accepting the committee amendments. My staff informs me that the committee was very cooperative and helpful in making the bill a better product, and I think it's going to show. This is a rare moment because it really brings together parties that are not always on the same page.

For example, Northern California and Southern California don't always agree on the water issues. The environmentalists and the water contractors don't all agree on how that water should be distributed and used. But this is a great opportunity, and we want to see this move forward. So it bridges together traditional opponents. It's bicameral and bipartisan.

So, we also have about 60 sponsors outside of the legislature right now. So, it's a good bill. It attacks two major problems. Basically, there's a subsidence in the in the valley where the aqueducts run. Now I want to say the aqueducts are gravity fed.

And when the when the land drops, the aqueducts are less capable of carrying water. If the subsidence continues further, then the aqueducts will be unable to produce and deliver water to Southern California. So that'll start happening, and they think they're saying by 2040-2045 there'll be a complete failure of the of the aqueducts, which serves 27 million people. So, this is a significant problem, a significant risk, and it's urgent. We need to start working on the subsidence as soon as possible.

The other problem is the Delta Levees. Some of these levees were built in the 1800s, and many don't have any of the Corps of Engineers' safety standards. And so, we're significantly at risk of levee failure, which would endanger, let's see, $22 billion in state assets. That's so we're asking to spend a fairly modest amount of money, at least relatively modest, to save a significant risk. But not only that, but if the levees fail, we're also putting people's lives at risk.

So, this is a significant and urgent problem both with the subsidence and with the levy failure. So, what has led to the subsidence is over-pumping of groundwater in the valley. More and more water has been taken out of the groundwater, and the and the groundwater sunk. I've heard some numbers now. They're kind of scary.

I don't want to scare the committee too much, so I'll leave those behind. But what SB 872 does, it directs $150 million a year to fix the subsidence and $150 million a year to fix the levy. So, we're looking at both of these problems. We want to make sure everybody in the state is satisfied. Basically, one of the most critical functions of the state is to provide infrastructure and water is the most critical factor.

We cannot let this problem continue. So, with that, I mentioned we have 60 or more organizations already, on board with this including, from Southern California, from Northern California, all around the state. And, today, I have two witnesses, Morgan Snyder from Restore the Delta and Jennifer Pierre from State Water Contractors. So if they would approach the bench and approach the microphone or bench.

Welcome. Lead witnesses have two minutes each, and you're welcome to begin when ready.

Is the microphone on? Okay. Cool. Chair Blake, spear and committee members, my name is Morgan Snyder, and I am here today with Restore the Delta. Thank you so much for allowing me to provide comments on SB 872 today. This bill is an important step in prioritizing investments in the Delta, for the Delta, as well as ensuring drinking water supply for 27 million Californians. There are currently 1,100 miles of levees weaving throughout a mosaic of islands in the Delta. These islands and waterways are home to Delta agriculture, commercial fishing, recreation and tourism industries, tribal cultural resources, and one of the most diverse ecosystems on the West Coast of the Americas.

Collectively, the Delta economy makes up nearly $7 billion annually and it's home to 4 million residents across the five Delta Counties. Delta Levees are foundational in protecting these communities and economies from flood risk. The Delta Levees were constructed in the late 1800s, early 1900s, and have not been up upgraded in over a century. In fact, many of these levees do not currently meet the US Army Corps engineer standard. These levees are also unique in that they are constantly holding back water.

And as climate change impacts weather patterns, Delta levies are coming under new stress stressors from extreme precipitation events, increasing the risk of a breach or boil, which would threaten human lives, property, infrastructure, and drinking water supplies across California. Repair and maintenance of levies are currently funded through a combination of state, local, and federal funding streams. The Delta Stewardship Council has done a significant amount of research on what investments are needed and have provided a tiered approach to investment prioritized by the level of risk. However, and critically, this strategy lacks prioritization and funding. SB 872 takes an important step to identify and allocate funding resources for this critical investment in Delta levees.

The proactive investment of $150 million over twenty years would protect upwards of $22 billion in state assets and save the state billions more on emergency funds to support the fallout from levy failures. Restore the Delta believes that this bill embodies the coequal goals outlined in the 2009 Delta Reform Act, protecting and restoring the Delta as a place and ensuring a reliable drinking water source for Southern California. I want to thank Senator McNerney today for spearheading this important legislation. Thank you so much.

Good morning. My name is Jennifer Pierre. I'm the general manager for the State Water Contractors. We are an organization of 27 public water agencies who all receive water from the State Water Project. As has been mentioned, we deliver water to 27 million people, and we constitute about 30% of their water supply.

We also delivered 750,000 acres of farmland. Given the scale and statewide importance of the State Water Project, protecting this infrastructure is essential to maintaining reliable and affordable water in this state. Subsidence in the Central Valley has already caused significant damage to canals. And while the Sustainable Groundwater Management Act will ensure that future damage isn't going to occur, historical damages, if not repaired, will eventually result, as the Senator noted, in complete cessation of delivery of State Water Project by 2045. The issue will start now, and it'll slowly move south until it is completely nonfunctional.

Our ability to adapt to climate change is reliant on our ability to move and store water when it's wet, for use when it's dry. A functioning delivery system is central to that goal. Additionally, a fully functional state water project provides significant opportunity to support the electrification of the California grid because it can be operated to increase or decrease significant loads and produce hydroelectric power. California's water infrastructure is interconnected. All of its components, whether it be Delta levees or state water project canals, must be functional to ensure clean affordable water delivery continues.

We were pleased to learn yesterday of the Federal Government's commitment of $540 million for federally owned California water infrastructure, and we urge an aye vote today on SB 872 to ensure the state is also contributing to our critical water infrastructure. Thank you.

Thank you very much. I appreciate your testimony. If there's anybody else in the room wishing to express support, please come forward and state your name, organization, and position.

Good morning, Madam Chair, Members. Glenn Farrell with GF Advocacy on behalf of the Crescenta Valley Water District and the San Gorgonio Pass Water Agency in strong support.

Good morning. Jonathan Clay on behalf of Metropolitan Water District of Southern California in support.

Good morning. Karen Lange on behalf of the Delta Counties Coalition, which is the boards of supervisors in Sacramento, Solano, San Joaquin, Yolo, and Contra Costa Counties all in support. Thank you.

Patrick Foy with the Three Valleys Municipal Water District in support.

Good morning. I'm Jose Reynoso, the general manager for the San Gabriel Valley Municipal Water District and the Public Water Agencies Group in support. Thank you.

Carol Mahoney with Zone 7 Water Agency in strong support.

Gabriela Fassio with Sierra Club California in support.

Good morning. Beth Olaso on behalf of Inland Empire Utilities Agency and the Municipal Water District of Orange County in strong support. Thank you.

Good morning. Sarah Stivers for the Los Virgenes Municipal Water District in the Coachella Valley Water District in support.

Good morning. Taylor Triffo with Kahn, Soares & Conway representing the Tulare Lake Water Storage District in support.

Good morning. Alex Loomer on behalf of Defenders of Wildlife in support.

Good morning, Madam Chair, Members. Kendra Dijogo with the Guoco Group on behalf of the Kern County Water Agency and San Bernardino Valley Municipal Water District in support.

Good morning. Adam Quinones, California Advocates on behalf of Santa Clarita Valley Water Agency in support.

Good morning. Chris Anderson on behalf of the California Chamber of Commerce. We have a support if amended position. The funding that needed here is urgently needed. Right now, only state-owned conveyance facilities would be eligible for the funding. We're requesting that federally owned, conveyance infrastructure also be eligible for the funding. Thank you.

Good morning, senators. Matt Cremins, California-Nevada Conference of Operating Engineers in strong support. Thank you.

Good morning, Chair, Members. Keith Dunn on behalf of State Building Construction Trades Council, as well as the District Council of Ironworkers in strong support. Thank you.

Good morning. Charles Delgado, California State Association of Counties in support.

Okay. Thank you. Anybody else in the room wishing to express support? Okay. We'll go to any lead opposition witnesses. If there's anybody wishing to express opposition in the room, please come forward. Okay. Not seeing any. Anybody wishing to express opposition in general come forward? No? Okay. We'll turn it back to the committee then. Any questions or comments for the author? Yes. Senator Valadares.

Thank you, Madam Chair. So, I do want to make sure I'm fully understanding the practical impact of the bill. And I'm going to be so supporting it, but I had some questions. So, my understanding is when it comes to water conveyance projects in California, rate payer cost can be lowered by seeking as much money, from as many sources possible, including our federal partners, which typically require either local or state cost share. Is there a reason the bill is seeking to limit the use of state funding to only proportions of arterial conveyance that is owned by the state rather than arterial infrastructure that's a statewide importance. I just need some clarification on that.

Do you wanna turn to the author?

Yes. The author or the sponsor.

Well, thank you for the question. I'll take a stab at it. And if one of the witnesses wants to improve my answer, that would be acceptable. Basically, there's a bright line between the state and the federal water projects. The Central Valley project is a federal project.

The state water project is the state project. The state typically funds the state canals and the federal typically funds, and they have different users, basically. The Federal Government just announced $540 million for support of the federal part, and so we take responsibility for the state part. So, it's just a division of responsibilities.

Okay. Is there any other? Okay. That's it. Thank you.

Okay. Thank you. I will turn it back to the author for close.

Well, you can see we have a very wide, broad base of support on this from labor, the environmentalist, the all the water districts that have come forward and there'll be more. So, it's bipartisan. It's bicameral. And the state has an immense responsibility to make sure that the state has the water it needs. The 27 million people that depend on the state water project are in need of this.

The longer we put it off, the more severe the problem is going to be and the more likely it is that people will lose supply of water. So, with that I ask for an aye vote.

Okay. Well, thank you very much. We don't have a quorum so we will continue as a subcommittee and when we get to the vote, we will. Okay. Thank you. Thank you.

Okay. I saw Senator Niello, but is Senator Padilla in the room? I don't... not sure.

He's shut down so we can call him to see if he can come back in.

Okay. Great.

He was now.

Senator, which senator are you speaking about? Niello? Okay.

He has staff members.

Okay. Great. Okay. Great.

Okay. We're going to go, first come first serve. So Senator Ochoa Bogh is here, and we will invite her to come forward and present her bill, which is SB 1,008, number four on the agenda. Oh, no. Senator Niello is now here, and he's number three on the agenda. I think we're going to have to go with him. If she was at the podium, it would be different. But your so it's your turn, Senator Niello. It's SB 981, number 3.

And thank you for your patience, Senator Ochoa Bogh.

Good morning, Ochoa Bogh.

So may I proceed?

You may.

Thank you very much. I appreciate the opportunity to present SB 981. It asks the California Air Resources Board, CARB, to include in an assessment of cost-of-living impacts in an existing economic analysis that it already produces for regulations and have economic impact of $50 million or more.

Now last year, you'll recall I presented SB 474 to this committee, which would have had made CARB an advisory body to advise the legislature, and then the legislature would vote to impose or not impose the regulations that CARB came up with. That, of course, was denied. We had a good discussion and there was discussion about the cost of regulations. And so, SB 981 seeks to do just that. It doesn't slow or weaken CARB's Clean Air, and climate work.

It improves the information on which these decisions are made by requiring carb to analyze how major rules affect gasoline prices, electric bills, food and goods prices, housing costs, and business costs in its standardized regulatory impact analysis, otherwise known more simply as SRIA. So, a little background. The Public Policy Institute of California recently found that the cost of basic necessities which make up a large share of spending by lower- and middle-income workers has increased substantially since 2020. Food and rent are up 25% on average, and utilities and gas are up 40% on average. Now certainly, this is not entirely because of air resources regulations.

But with affordability being a top-of-mind issue for our citizens as well as this body, it's important to know how regulations impact the cost of living. As you know, CARB's regulatory reach is vast as it has passed and continues to contemplate regulations that impact all of these items, even housing materials as CARB seeks to contemplate decarbonization of the building sector as is mandated by Assembly Bill 2446 of 2022 by Assemblymember Holden. I believe we can all agree that we need more housing units at prices that families can afford by explicitly integrating cost of living impacts into CARB's SRIA. The bill promotes transparency, supports better targeting of mitigation measures, and helps ensure that California's ambitious climate goals remain compatible with our affordability goals. And here's a very important point, and a point that I made in my closing argument last year.

The science tells us that California cannot make an impact on the atmosphere. California's greenhouse gas emissions account for less than 1% of global emissions and yet global emissions have actually increased in the air, have actually increased since AB 32 was passed, demonstrating that other jurisdictions are not following our lead. To try to recruit that following, I would think that it would make sense to show that our policies can be pursued in a way that is not overly burdensome to the people and businesses who bear the cost. If we fail to do that, we saddle ourselves with costs in a noble but failed effort. Eventually people who are paying these high prices are going to realize that they're doing it at least to an extent relative to the reduction of greenhouse gas emissions to no effect.

In the interest of continuing to pursue the goals of AB 32 in a way that serves the everyday affordability of California citizens and businesses, please support AB 981. My witness is me, so I am performing without a safety net, and I invite some discussion.

Okay. So just to be clear, you do not have any lead witnesses in support?

I do not.

Okay. If there's anybody else in the room who would like to come forward and express support, please come to the microphone at this point and say your name, the organization you represent, and your position on the bill.

Good morning. Melissa Kosicek with Western Growers and strong support. Thank you.

Good morning. Elizabeth Esquivel with the California Manufacturers and Technology Association, as well as on behalf of the California Business Roundtable. Thank you. In strong support.

Madam Chair, Members, Andrew Antwih with Shaw Yoder Antwih Schmelzer & Lange here today on behalf of the Western Propane Gas Association. We thank the author, and we support.

Good morning, Chair, Members. Marlon Lar from the California Restaurant Association. Timely, reasonable bill. We appreciate this bill. Often, regulations and the impacts of those regulations aren't apparent until very later on in the process. Doing it this way helps us stay informed. Thank you.

Good morning, madam chair and members. Skyler Wonnacott of California Business Properties Association in support.

Okay. Thank you very much. Do we have any lead witnesses in opposition who would like to come forward? Welcome. Please come to the microphone. You have two minutes and you're welcome to begin when ready.

Thank you Madam Chair. Bill Magavern with the Coalition for Clean Air, in opposition. We definitely agree with the author's intention to keep costs lower for Californians, but this bill is not the way to do it. I think that your committee analysis does a good job of going through the issues and concludes ultimately SB 981 requires an unbalanced and expensive economic analysis which would delay necessary rule making from a single key state agency. I want to confirm that based on many years of experience at that agency.

We spend a lot of time in rule makings at CARB. They are always very lengthy. And I've been involved both before and after the SRIA was required. And the SRIA has added considerably to delays, in rule makings. This bill would add more red tape and delay.

And the reason why that's important is the health of Californians. The author talked about global impacts. He didn't mention that California has by far the worst air pollution in the country. And so, we need to be expediting, getting relief to Californians from that pollution and the sickness, and very real health costs that it imposes. 981 would mandate that CARB conduct analysis that it's actually unable to perform.

They don't know what the cost of gasoline are going to be. They don't know when a president will start a misguided war in The Middle East. They can't predict the oil companies taking advantage of the mystery gasoline surcharge that's been identified by both academic and state economists. So for those reasons, we don't think that this bill is the answer. It would actually result in dysfunction and additional litigation. Thank you.

Okay. Thank you. Any other lead witness in opposition? Okay. Not seeing any. Do we have anyone in the room wishing to express opposition? Please come forward. State your name, organization, and position on the bill.

Good morning. Michelle Canales with Union of Concerned Scientists. Respectfully oppose.

Okay. Thank you. Anybody else? All right. Not seeing anybody. We'll bring it back to the committee. And I'll just start with a couple of comments. I do appreciate the author's efforts here. I am not able to support this bill. And I just wanted to explain a bit about why.

I think it's really important that we recognize that we do have twin crises, the climate crisis and the affordability crisis. And they both have real and detrimental impacts on Californians. So, the question of how do we balance the cost of climate consequences with everyday costs is something that we think about a lot here in the legislature, and I think about a lot. The cost of transitioning to clean energy is not the largest contributor to the affordability crisis. High inflation, lack of housing, and a disrupted supply chain are the main drivers of the affordability crisis.

So, we recognize that CARB is not infallible. And there are a number of different bills this year and in in past years, but particularly more bills this year about CARB. We should consider the impacts of climate policy on low income and disadvantaged communities. But this bill would add time and cost to CARB's regulations. And it does not represent the balanced approach that would ultimately benefit Californians.

This bill, SB 981 is one of three Republican bills that all require CARB to add expensive layers of analysis onto the impacts of their regulations on the cost of living. So, it's important to recognize what this bill is doing and particularly why I'm not able to support it today. First, it's redundant. So, CARB already estimates cost to businesses, including competitive advantage, job creation and investments, as well as impacts on the average personal income of individuals. This bill also is, is burdensome.

So, an economic assessment on individual consumer goods is an, it's an incredibly granular analysis, and it's difficult to model. There's no question that this would add time and cost to new regulations. And the third point is that it does not fully address affordability because CARB is not the only agency that has impacts. Impacts on transportation, utilities, food or housing costs. But it would be the only agency that's required to estimate these costs.

So, we will be hearing, two other bills related to carbon and the similar topic, coming up in this committee. But at this point I'm not able to recommend, this bill pass. So, with that I'll turn it over to my colleagues if they'd like to make any comments. Yes, Vice Chair.

Thank you madam chair. I think you hit on really great points. I think you're right that this isn't the sole number one even majority sole contributor to the affordability crisis. But I do recognize that it could play a part and it does play a part in that and we should be looking at if there are certain things outweighing the benefits and so forth. So, I get the intent, Senator.

I just have two things I wish you could if you could address. The first one is I read in the analysis and the opposition mentioned that CARB does not have the capacity to do this. I recognize with LCFS. They're able to do that because it's specific to just what's being increased on the gas prices. CARB has, the purview of so many other different things.

It might be a little bit difficult to really hone in on the cost increase in that specific project. The second thing if you could address is, regarding the lack of robust approach here. You're just looking at the cost and ignoring the benefits altogether. I think it'd be important to compare cost and benefits of a certain thing. For example, the analysis talked about, sure, this is going to cost a consumer $4 extra.

But on the other side, did it prevent a hundred kids from going to the hospital with asthma? Did it prevent x, y, and z? So, ensuring that there's a comparison of that would be important. I will be supporting your bill today. Those two things are outstanding for me.

I think if you can further add to this bill, it'd be better, it'd be better positioned to really look at things in a more holistic approach. With that if you could please address those two questions, comments.

Sure. With regard to capacity, I know that these economic analyses are not easy. The SRIA analysis does take time. The legislature chose to impose that analysis on all regulations because regardless of the time that it takes, the cost of regulatory impositions on the economy is still a very important consideration and we need to know that. And I'm seeking a more granular approach because of the affordability challenge that we have currently.

Now we talked about the impacts of regulations and that's not the only impact of cost of living and that's true. Other impacts of cost of living as was stated is inflation, supply chain issues, housing affordability. I would say the latter part of that is regulatory requirements. But the state, we can't affect any of the other impacts on the cost of goods. We can't affect inflation.

We can't impact the supply chain challenges. The really the only way that this legislature can affect cost of living increases is through regulatory reform. There really isn't any other influence the state of California can have on cost of living except for the cost of regulatory issues. And I realize CARB isn't the only one but that gets to the capacity issue and that is, other entities are General Fund-funded and therefore increased cost to do increased analysis is a challenge under today's budget challenges. But CARB is a special fund funded by Special Fund.

And it might be a little easier to find those increased costs. I'm not saying it's going to be easy. It won't. And you talk about the costs.

But even if they have the funding to do it, do they have the actual systems capacity to address or how to calculate that cost of all the different things?

They probably didn't have it when SRIA was first initiated. So, we have to adapt to new things. And it's just an issue of priorities. Do we believe that it is important to understand the impact of a regulatory action on the cost of living of everyday citizens and businesses? If we believe that that's important, then we need to try to address how to do it.

And as I said, when SRIA was first implemented, I rather doubt that the entities that have to meet that were perfectly equipped to do it at the time, but they are now. The cost and not benefits and the health impacts, it was mentioned that California has the first the worst air quality of any state in the country. I think if you look at that by region, it's not true. There have been tremendous improvements in air quality since let's say go back to the early seventies. Emissions from fossil fuel vehicles are maybe a percentage of what they were in 1970 and continually being reduced and that has significantly improved air quality.

But when we talk about air quality that is the health and symptoms of asthma that air quality might create. That's not carbon dioxide. Carbon dioxide is not a toxic air pollutant. The health impacts with regard to greenhouse gas emission reduction has to do with the impacts of climate change on health and there is no benefit there. We cannot by ourselves affect the greenhouse gas emissions in the atmosphere.

As I said, they're greater now than they were when AB 32 was passed. The governor talked glowingly of the Chinese economy that produces so many green products and that's true. But they produce those with an economy that is entirely driven by coal-fired utility plants. China and India, as long as they don't follow our lead relative to the emission of greenhouse gases, were not going to get there. So relative to this cost and benefit, we're not achieving any benefit because we can't drive climate change by ourselves.

I'm not saying nor have I ever said that we shouldn't do these things. And I agree that we should, but it has to be with an understanding as to what sort of burdens there are on everyday lives and on businesses and on the economy. But at the same time, to the extent that we can address these things to make you more comfortable with an aye vote, I definitely want to absolutely talk about it.

Yeah. Because you almost lost me on with your remarks there, sir. So-

Well, I know. And I and I one of the things of one of the principles of salesmanship, which I know a little bit about from my private sector business is when you close a deal, you shut up. And I thought about that before I said it. But I think it's very important to understand the nature of the challenge and the difference in air quality relative to health issues and air quality relative to greenhouse gas emissions. They are two different battles.

And so, I just had to point that out. But I very much appreciate your support. And Okay. We and we will talk more about this.

Okay. Well, let's go to the Vice Chair now.

Thank you. You answered a lot of my questions in in your rebuttal there. So, you're still on board though. Right? Okay.

Good. So, you know, I California's energy sector is roughly 8% of our economy. And when that sector experiences, price spikes or volatility because of regulation, then the rest of the 92% of our economy is impacted. And what I hear most from my district over the years, is that the price of energy are killing our families. Quite literally in their pocketbooks, you know, the price of getting to work, of getting kids to school, the price of electricity, of heating your home, of cooling your home, it's all going up.

I also hear from businesses, from the trucking industry who are perpetually having to keep up with new regulations from either CARB or from, the local air districts. And its regulation, it's layer upon layer upon layer. And even when there are new regulations are proposed and passed, our businesses may not feel it for years later. And then they're shocked. And they can't sustain.

And they're selling equipment and they're selling their businesses. There are real economic impacts that are currently not considered in a vast majority of CARB's regulation because they have a sole goal. It's to meet air quality standards. It's to meet climate goals. And I think this is important to say to CARB, no.

What you're doing impacts real people. Now to provide a little bit of clarity, your bill is not- one, I love the bill. I'm supporting it. I have a similar bill. Can you kind of explain to me, because the impact, the economic impact isn't going to be required for every regulation in every program, from my understanding.

What was that again?

That this bill will not require an analysis of every new regulation. It's specific to a dollar amount. Is that correct?

Yes. That consistent with the three-year requirement, a regulatory impact of more than $50 million.

Thank you.

Okay. Well, with that we'll go to you to close.

Thank you very much. I appreciate it. I think I've made some of the more important points that would have been made on that side of the dais. But I would add with regard to the redundancy, the burdensome nature, and singling out CARB, I don't see a redundancy unless to do a macro analysis and then try to translate that to a micro analysis is redundant. I would agree with you, but I don't think that's redundant and the macro analysis doesn't tell us how it affects individual everyday lives.

So, I don't think that it's redundant. With regard to the burden, given the increase in the commodities that are affected by CARB's regulations, again, I'm not saying that CARB is the only cause of that, but there are impacts. And that's a burden on everyday Californians and it's burden on businesses. So, is it a burden on CARB to do this analysis? Yes, it is.

As I said when SRIA was first implemented, they probably did not have the capability to do that. But they do now and we figure out how to accomplish things. And with regard to CARB only, I'll repeat something I said before. The only way that we can affect cost of living issues is through regulatory reform. We can't impact inflation.

We can't impact supply chain issues. Think about everything that impacts the cost of food, gasoline, utilities, the cost of doing business, and identify those factors. And for the most part, we can't affect them. But with regard to analyzing it from a regulatory perspective, we can. So, and with regard to CARB only as I mentioned other entities and it would be very reasonable to spread this responsibility more widely, but we have budgetary pressures now with regard to General funded departments.

CARB is Special Fund-funded and so that issue is a little bit easier to navigate. So, with that, I would respectfully and gratefully ask for an aye vote.

Okay. Well, thank you. We're we're still operating as a subcommittee so when we get to the vote, we will take that under consideration. And we're we'll go back to the agenda, order now. So file item number two is Senator Padilla, SB 887. We invite you to come forward. And after that, we will have item number four, SB 1,008 from Ochoa Bogh. And thank you for your patience, Ochoa Bogh. You are welcome to begin when ready.

Thank you madam chair and members. I'm pleased to present SB 887. I wanna begin by thanking you for your leadership and your staff's collaboration, on this bill and we'll accept the committee amends. This bill would ensure that data center projects, which we hear more and more about today, the circumstances in California with respect to certainly hyper scale data centers have changed in just the last year. California ranks third in the nation.

The number of data centers, that are necessary infrastructure to serve a technology boom, certainly serving artificial intelligence technology. However, in the aggregate, those don't match some of the things we're seeing in particularly inland portions of the state with large areas of land availability to see hyper scale, massive scale data centers that have a tremendous adverse impact on resources, on an environment potentially, and certainly on energy and energy costs. This bill would ensure the data center projects go through CEQA review, but it creates a pathway of certainty for them with respect to making sure that there isn't wasteful or unnecessary extended, judicial intervention in a way that does not serve an environmental purpose. The rise of this technology as I noted in the build out of these centers are, some of which, for example, are at meta scale the size of Manhattan, certainly one in Louisiana. One set to consume over five gigs, equivalent to five million homes.

These data centers consume massive amounts of energy and water require large investments in the grid in the grid including it often time using diesel or other fossil fuels to shift ensure sufficiency of power availability. Without proper guard rails, without proper incentives to ensure that these are done correctly, these can be disastrous for the state on an environmental scale and on an economic scale. An example in my district alone, a 700 acre, 330 megawatt project alongside a residential community and an elementary school has broken ground with literally no public input and the assertion on the part of the developer that it is ministerial exempt from CEQA. This bill will ensure that centers are not exempt, creates a pathway of certainty for them to get proper and appropriate review, and in exchange, appropriate benefits to community, to workers, and to protect the environment. It ensures communities near these centers are protected from polluted air, provide public comment in all facets, and pure transparency throughout the process.

With me today, I'm happy to have Matt Freeman with TURN and my good friend Cori Schumacher with IBEW Local 569.

Great. You're welcome to begin when ready. You each have two minutes.

Thank you Madam Chair, Members of the committee. My name is Matt Freedman. I'm a staff attorney with The Utility Reform Network and TURN is one of two cosponsors of SB 887. As explained by the senator, this bill would add data centers as eligible to be classified as environmental leadership development projects that may receive judicial streamlining under the California Environmental Quality Act. SB 887 establishes specific criteria that would allow data center projects with at least 50 megawatts of peak demand to receive an ELDP designation.

And these criteria are intended to constitute superior environmental performance and labor standards. They would require the project to demonstrate several key facts. One, no increases in fossil fuel consumption in the state. Two, on-site energy storage sufficient to meet 100% of peak demand for the facility for at least four hours. Second, relying on zero carbon electric generation located behind the meter to the maximum extent feasible.

Next, reliance on one hundred percent zero carbon electricity resources to serve the hourly needs within five years of initial operations, at least three quarters of which will have to be newly developed. A community benefits program, the use of recycled water and water efficient technologies or waterless cooling systems, full cost responsibility for grid interconnection and no shifting of costs to other electric rate payers, and the use of project labor agreements and compliance with prevailing wage requirements. The bill directs the Energy Commission to establish uniform standards for compliance with these requirements. It would ensure regular reporting to the Energy Commission by data center operators, and the Energy Commission would be authorized to enforce noncompliance as appropriate with these standards. The impact of data centers on the electrical grid is a hot topic of discussion at the state, federal, and regional level.

Forecast of growth in new data center deployment have led to serious concerns about needed grid upgrades, the amount of electricity that may be consumed by these facilities, cost shifting, and the potential impacts on progress towards California's zero carbon electricity objectives. The massive increase in the number and scale of large customer interconnection requests driven largely by data centers in California requires the legislator take swift action to protect rate payers and ensure that the addition of these loads is beneficial and not harmful to the achievement of the state's affordability in greenhouse gas reduction targets. Two weeks ago, a number of the largest technology companies in The United States attended an event at the White House and signed a pledge to build, bring, or buy new generation resources needed to meet the electricity needs of new data centers. And these companies promised to pay for all the grid infrastructure costs needed to power these facilities through utility tariffs. The standards in SB 887 would ensure that any eligible project fulfills obligations at least as stringent as those included in the federal pledge.

Thank you for your comments. Thank you.

Thank you.

We ask for your aye vote.

Thank you.

Good afternoon. Good morning. Chair Blakespear and, Committee Members. My name is Cori Schumacher. I'm the policy director of IBEW 569. We represent 3,800 union electricians and power professionals in San Diego and Imperial Counties. We are here to urge your support of this important bill. We know that artificial intelligence is driving today's technological revolution. We're collectively experiencing change that parallels prior industrial relations in scale. Industrial revolutions in scale with all the attending economic opportunity and disruption.

Today's tech revolution represents a real opportunity for California, an opportunity we should seize and shepherd. Though a digital asset, AI requires physical scaffolding and significant energy. These are known material considerations IBEW has been tackling for a number of years. SB 887 incentivizes environmentally responsible data centers that utilize the best trained workforce, good policy that will shape this vital sector for decades, creating economic opportunity, and a stable pipeline of high road green careers that provide family sustaining wages. Recent projections suggest that more than 300,000 new electricians are needed nationally over the next decade to meet AI driven demand.

SB 887 will keep California competitive during this critical technological shift while encouraging cleaner, environmentally responsible data centers that support the electrical grid and our local communities. We also believe that this would, represent a model policy that could be replicated throughout the nation. For these reasons, we urge your support of this important legislation. Thank you.

Okay. Great. Thank you. Anybody else in the room wishing to express support, please come forward, state your name, organization, and position on the bill.

Thank you, Committee and Chair. My name is Sam Uden from Net-Zero California, a co sponsor of the bill. Thanks to the Senator for his leadership, which we see is a key, component for the California to establish a nation leading standard for affordable and clean data centers. Thank you. And obviously, support

Good morning, Chair and Members. Will Breeger from State Strategies. In support of the bill, we're here today for Climate Action California.

Jonathan Clay on behalf of the City of Imperial in strong support.

Good morning. Michael Chan on behalf of Audubon California in support.

Morning, Madam Chair, Members. Mari Lopez with the California Nurses Association in support.

Michelle Canales with the Union of Concerned Scientists for support and concept.

Okay. Great. Anybody in the room wishing to express opposition? Lead witness in opposition, please come forward. And if maybe- maybe you could shift over so they could sit together. Welcome. You each have two minutes and you're welcome to begin when ready.

Thank you. And good morning, Chair Blakespear, Members of the Committee. My name is Kara Bunder, and I serve as a state policy director at the Data Center Coalition. I'm here in respectful opposition unless amended to SB 887. The Data Center Coalition is the National Trade Association serving as the voice of the data center industry, and our members are leading data center owners and operators and companies that lease large amounts of data center capacity.

Data centers are the high-tech industrial hubs of the twenty first century. They provide the critical infrastructure for everything from financial services and health care to advanced manufacturing and AI. SB- SB 887 proposes a regulatory environment that would significantly hinder data center development in California. By forcing even small scale code compliant facilities into a discretionary process, the bill introduces years of risk and litigation delays. Modern data centers utilize sophisticated liquid cooling and advanced electronics.

Excluding them from the same protections offered to other high-tech facilities penalizes the very infrastructure California needs in order to remain a global leader. While the bill offers streamlining for environmental leadership projects, the criteria are virtually impossible to meet. Requiring 100 percent zero carbon electricity for hourly needs within five

years, 75% of which must be 75% of which must be newly developed, exceeds the state's own aggressive goals. Additionally, the mandate for four hours of zero carbon storage at a 100% peak demand is a requirement not placed on other industrial customers in the state. Finally, the bill creates a unique financial liability by requiring data centers to fully recover all grid investments if they cease operations. Singling out one industry for stranded asset risk while not applying the same treatment to heavy manufacturing or large commercial campuses with similar demands will inevitably drive high paying jobs and the significant tax revenue associated with data centers to neighboring states like Arizona and Nevada. To give you an idea of what is at risk, from 2022 to 2023, California's data center industry directly and indirectly generated $23,880,000,000 in state and local tax revenues.

And the latest government spending suggests data the data center industry's total state and local contribution of $10,700,000,000 in California in 2022 was sufficient to fund almost half the construction, maintenance, and operation of highways, streets, and related structures in the state, including toll highways, bridges, tunnels, ferries, street lighting, and snow and ice removal. Our members are committed to paying for their full cost of service for the electricity and infrastructure it uses and be a good neighbor in the communities where they operate. We urge the committee to resist- resist advancing SB 887 in its current form, and we welcome the opportunity to discuss amendments with the author. Thank you.

Good morning, Madam Chair, Vice Chair, and Members of the Committee. I'm Ahmad Thomas, CEO of the Silicon Valley Leadership Group. And we must respectfully oppose SB 887 unless amended. The Silicon Valley Leadership Group is the leading business association for Silicon Valley's most innovative companies. Our members reflect the full breadth of the region's innovation ecosystem and play a major role in supporting the state's general fund.

California's innovation economy depends on predictable, objective, and timely permitting. And unfortunately, SB 887 would move us in the opposite direction. Our opposition to the bill centers on three core areas of concern. First, it would single out data centers for uniquely burdensome CEQA treatment despite their central role as the digital backbone of the twenty first century economy. SB 887 bars data centers from CEQA categorical exemptions.

Exemptions that remain available to similarly situated industrial facilities. And does so without any project specific environmental finding. This is a targeted carve out that treats one technology used differently from similar high-tech industrial projects. Second, while the bill gestures towards streamlining via the environmental leadership pathway, the eligibility terms are practically unattainable. The requirements of 100 percent zero carbon electricity on an hourly basis within five years, with 75% newly built, and a mandate of four hours of zero carbon storage at 100% of peak demand, go well beyond what is currently feasible at scale.

Third, SB 887 imposes a unique stranded asset liability, requiring operators to fully repay all grid investments if operations cease. Let me be clear. SBLG supports environmental stewardship, grid reliability, and paying the full fair cost of service. But policy must be technologically feasible, nondiscriminatory, and align with established CEQA principles. For these reasons, we respectfully urge the committee to amend the bill so that it aligns data centers with similarly situated industrial customers and with current technological feasibility.

SBLG stands ready to work with the author and stakeholders on balanced amendments. Thank you.

Thank you. Thank you to both of you for your testimony. If there's anybody else in the room wishing to express opposition, please come forward to the microphone. Express your name, organization, and position on the bill.

Good morning, Madam Chair and Members. Catherine Charles on behalf of the Bay Area Council in respectful opposition. Thank you.

Good morning, Chair and Members. Jose Torres with TechNet and respectful- respectful opposition as well.

Good morning, Chair Blakespear and Members. John Kenrick on behalf of the California Chamber of Commerce in opposition.

Good morning, Chair and Members. Jazmine Advincula with the Cal Asian Chamber. We oppose unless amended. Thank you.

Okay. Thank you. Anybody else? Okay. Not seeing any. We'll bring it back to the committee. And I'll just make a few opening comments. So I very much appreciate the author's work on this. This is a salient issue both in your district and also statewide. So I appreciate you really digging into what data center deployment will look like in California.

Data centers can bring significant economic benefits to local governments and to the state. And there are equally significant concerns about the environmental impacts and the community impacts of data centers. We do see a lot of news articles about data centers right now as well. SB 887 strikes a good balance by requiring data centers to go through the environmental review and public transparency process of CEQA, while also offering CEQA streamlining for data centers that meet strong labor and environmental criteria, and that include a community benefits agreement. So I think this bill is striking a good balance, between the pros and cons of data center development in our state.

And I am grateful that the author is working on it. Thank you.

Thank you, Madam Chair.

Okay. And anybody else wishing to make a comment on this bill? Yes, Sen- Senator Menjivar.

Senator Padilla, I'd love to give you an opportunity. Because I'm all in with what you're doing.

Thank you.

If you could just address the oppositions, like, they're gonna go to our neighboring states. Can you share a little bit more about your thoughts on that?

Thank you, Madam Chair, and thank you, senator, for the great question, the opportunity to respond. We hear that refrain often. We're leaving California. We're going somewhere else. Meanwhile, there are numerous pending hyperscale applications certainly in rural and under invested areas of the state as we speak.

And to be blunt, that is often because of land availability to be able to achieve hyper scale in areas of the state that heretofore have not traditionally, to be blunt, had either economic or political capacity to resist situations which may actually exploit and not benefit a community. There were a couple of things, since you opened the door, with your indulgence that I'd like to correct the record on. It was stated by the opposition that the bill hinders development and is almost discriminatory in that it's treatment of these particular centers. I will just say the record is abundant throughout the country that hyperscale data centers are new and they are unique. They represent a new circumstance with respect to how they operate and particularly with respect to how they impact our environment, environmental resources, and certainly communities that can't absorb those adverse public health and environmental impacts.

They have the capacity to consume enormous, enormous at scale quantities of energy and resources in a way not seen in modern history. So unique sets of circumstances demand unique responses certainly to protect our communities and to maintain the integrity of the statutes that we have in place that are designed to have appropriate environmental review. I don't think there is a risk that people are gonna go to other states simply because they have to comply with environmental review. Indeed, the environmental leadership development program process was designed to, as the chair points out, create a balance between maintaining the fact that there are they should be subject to environmental review under CEQA, but at the same time provide some certainty to people who are willing to meet high standards. They're willing to meet standards about energy procurement, and reliability, and ability to distribute energy throughout a service territory when it's called upon at peak demand.

And to make sure that that energy is procured from renewable resources. To be able to make sure they're not shifting costs to people unnecessarily because of the massive scarcity in short time that's created that pulse power off the grid in massive quantities. To make sure that there are community benefits in place. The trade off is, if you meet high standards, you get a- a level of certainty in review that cuts down on this process. So it is a mutual benefit, both maintains integrity of our processes.

So the other assertion was that some of these standards were unattainable. I don't think we've experienced that with ELDP projects already that we've had successfully under this review. I think the chair is aware of that. And I just don't think that's supported by any facts in the record. So again, the bill seeks to strike a balance.

We wanna be supportive. And I I just think on a 100,000 foot level, thank you my friend. My I've forgive me members of the committee but asthma really is rotten when you're presenting. We can do both. The conversation we have in our modern politics today around any regulation is always characterized to us as a binary choice, a zero sum.

You can either support innovation and industry, you can be supportive of that, need or you can have environmental protection and community benefits. The implication being that you cannot have both. That is flat wrong and I reject that out of hand. The old adage in this country used to be what we used to call the American and California can do spirit. It used to be that we can walk and chew gum at the same time.

That we can do both. That we can support innovation and industry. We can provide the opportunities that only California can provide certainly at scale. And we can maintain high standards that set an example for this country around environmental protection, resources, and benefiting and not exploiting communities. We can do both.

And I reject that premise out of hand that it has to be one or the other. Because that undermines the attitude that we are just incapable of tackling complex things in this country anymore and that is wrong. We can do this and we can get it right and because of the demands that these facilities place on community resources, we must do it right. And I thank, the Mem- the senator for your indulgence and your indulgence, in my answer, Madam Chair as well.

That was arousing sounding closing even, but we're not even quite there yet. So I'll return to the Senator Menjivar, is that good? Okay. Yes. Vice chair.

Thank you, madam chair. So my district is home to Lancaster, City of Lancaster, which is a, community that cares deeply about clean energy. We're gonna be- we are the hydrogen capital of the world. But we're also really embracing data centers. And these data the local data centers work really closely at the- at the local level- level.

I think what I'm concerned about with this bill is very prescriptive at the state level and is gonna cut off, opportunities for local communities to streamline projects that they think benefit their community at from a balanced perspective. So I'd love to understand more from, the opposition. Like what your current what current data centers engagement at the local level looks like. We just love a better understanding of that for when you're developing data centers.

Sure. I'm happy to start. Again, Kara Bunder with the Data Center Coalition. So to your point, Senator, our members do work very closely with the local authorities and- and agencies that are responsible for, you know, approving these projects. They're, you know, following local codes and local zoning, regulations as well. You know, we talk a lot about the the energy use and the water use of data centers.

And of course, those are also often, regulated at the local level. And our members are working with those folks to make sure that they are in compliance with what is being required at those levels. I- I- I share your concern with having, you know, this overly prescriptive approach at the state level and not allowing the, you know, local authorities to handle what is appropriate for those economic development projects in their community.

Okay. Thank you. Any other comments from committee members? Okay. Then we'll go back to the author for close.

Briefly, Madam Chair and Members. Thank you. Again, I just wanna address the latest question in response. I think a great example of why this bill is needed is the one I cited with respect to one large hyper scale application pending in my own district. This is someone who is, proposing a massive data center that would on reliability and storage rely on new connections to fossil fuels in an under invested community of color that already has some of the worst environmental justice and and public health challenges in the entire state.

An area of my district that has poverty rates double the state average, asthma and childhood disease rates much the same, directly attributed to poor air quality and the emission of fossil fuels in the region, and the lack of environmental mitigation, the lack of community benefits, and a- and a project proponent in that particular case who's asserting complete exemptions ministerially based on zoning, based on, you know, and is now being litigated in the courts in Imperial County. That's exactly the scenario that demands that we set standards for these types of projects. And with that, Madam Chair and Members, I would, at the appropriate time when you have a quorum, respectfully ask for an aye vote.

Okay. Thank you. Well, we're gonna pause for a moment and have our committee assistant call the roll because we do now have a quorum.

[roll call].

Okay. A quorum has been established. So we will now, move to vote on your bill if we have a member who makes a motion. Senators, does anyone move? Okay. Senator Menjivar has moved Senator Padilla's bill.

Thank you.

And the motion is, do you pass as amended to Energy Utilities and Communications?

[roll call].

Yeah. 3. Yeah. Okay. Okay. It is 3 to 1 and we will keep it on call.

Thank you Madam Chair.

Thank you Senator Padilla. We will now go to Senator Ochoa Bogh. Thank you for your patience. We are on SB 1,008, item number four.

You're welcome to begin when ready.

Good morning, Madam Chair and Members. Senate Bill 1008 would renew the exemption from the California Environmental Quality Act for the closure of an at grade rail crossing by order of the California Public Utilities Commission that expired in January 1, 2025. This is a noncontroversial measure that restores a long standing policy to ensure timely action on rail safety. The PUC will continue working with all relevant stakeholders when assessing the safety of an at grade rail crossing. The rain state- the rain statement of this prior exemption will better protect the public by allowing the PUC to continue exercising its authority to alter or abolish dangerous crossings in a timely manner to protect public safety.

Joining me today is Peggy Ygbuhay, Senior Director of Public Affairs for Union Pacific Railroad who is happy to answer questions.

Welcome. Please come forward and you're welcome to begin when ready.

Thank you very much, Chair Blakespear and honorable members of the committee. Peggy Ygbuhay. I am the Senior Director of Public Affairs for Union Pacific Railroad. I have been in my current position for three years as of last Sunday. And before that, I was with our public projects department engineering for about a decade.

I've been with railroad, this is my thirty second year so I have a little bit of information about how we manage projects, on the railroad side. And I really just wanted to, you know, thank senator Ochoa Bogh for bringing this very, very important bill forward for the exemption foreclosure of at grade crossings. Union Pacific strongly endorses the US DOT's policy to eliminate redundant crossings that are at grade, and this is for safety.

No crossing is a safe crossing, but it has to be done in collaboration and in partnership with the road jurisdiction and with PUC as well as the operating railroad. In California, we have about 8,500 at grade crossings that are active throughout the state. So Union Pacific has about 2,000. And of course, there's several other operating railroads in the state. So, you know, not only do we work in collaboration with the local road authorities and jurisdictions.

So think of the state. If if the state owns the crossing, the city, the county, it's an agreement between Union Pacific and in this instance of Union Pacific, and that's who I'm testifying on behalf of, and the county, city, or state. There's also an an incentive program that Union Pacific has to contribute money to close a crossing. That contribution requires a federal match up to a $100,000. So there's been a lot of conversations I've had with numerous cities over the tenure of my career, numerous counties about the opportunity to close various crossings.

It is a federal law to eliminate redundant at grade crossings. So of course, we support that, but we also support doing it responsibly. And you know, in collaboration, in agreement with all parties. I I stand ready for any questions you have.

Okay. Well, thank you very much. Anybody else wishing to express support for this bill, please come forward. State your name, organization, and position.

Madam chair, members, Skyler Wonnacott, behalf of California Business Properties Association in strong support.

Madam Chair, members, Pat Moran with Aaron Read and Associates representing BNSF Railroad in support. Thank you.

Okay. Anyone else in the room wishing to express support? Okay. Anybody in the room wishing to express opposition? Please come forward as a lead witness. Not seeing anyone. If you would like to come forward and express opposition at the microphone, please do so. I don't think senator Strickland is expressing opposition to this bill. No. Okay. Well, we will bring it- we will bring it back to the committee. Any comments?

Okay. Good. Well, we'll turn it back to you Senator for close.

Easy. In the interest of public safety, it's important that we equip the PUC with the tools it needs to act quickly and effectively to protect our communities. I respectfully ask for an aye vote.

Okay. Thank you. Who who was? Oh, the Vice Chair. Okay. Great. The Vice Chair moves the bill and the motion is do passed to the Senate Committee on Energy, Utilities, and Communications. Committee Assistant, please call the roll.

Senators Blakespear? Blakespear, aye. Valladares? Valadares, aye. Allen? Allen, aye. Dahle? Gonzales? Hurtado? Menjivar? Menjivar, aye.

Okay. That's 4-0. And we will keep that on call. And let's, let's see. We have, we have two authors here. Senator Strickland is next. And if any members of the committee need to leave and you would like to record the vote, we can go to the votes for the earlier bills. Are you listening to me? Senator Allen, Senator Manjivar, Vice Chair? Okay. Senator Allen looks bewildered.

Thank you, Madam Chair, Senators. We saw the coming, this coming with high gas prices with two closures of two oil refineries, Valero and Phillips 66. Their closures meant that 20% less oil production would happen here in California. This is why in January, we asked the governor to go to emergency session to go for midterm, short term, and long term solutions to this crisis that we're facing here in the state of California. Today, California drivers are paying $5.56 on average, while the national average is at $3.84.

In January, California drivers were roughly at $4 per gallon, unleaded gas. By mid February, the price jumped to by 35 to 40 cents, before the war. California gas prices rose in February mainly due to the refinery outages, tight supply, while long term contracts closures of Phillips 66 and Valero may have added upwards pressures on the prices. Here we are today. Gas prices continue to climb.

My bill my bipartisan bill, Senate Bill 1035 is the only immediate short term solution and resource, the tools that we have in the shed that we can use for immediate relief. Senate bill 1035 provides immediate cost relief to Californians by temporarily suspending three major contributors to gas prices, and for one year. The sales the sales tax and gas, the low carbon fuel standard, and the LFF- the LCFS cap and invest compliance mechanism. Importantly, the bill requires that all cost savings be passed directly to drivers at the pump, ensuring consumers actually benefit from this suspension. 1035 also includes transparency requirements, requiring receipts to show the amount of tax that would have been charged, so Californians can clearly see the savings if this bill passes.

And to ensure transportation projects remain funded, the bill temporarily provides General Fund Dollars to offset losses to infrastructure. California's continue to have the highest gas prices in the nation and families are feeling the pressure every single day. Gas prices disproportionately affect working families, commuters, and small businesses that rely on cars to earn a living. State taxes and regulatory programs are major component of these costs, and current law provides no mechanism to temporarily suspend them during periods of extreme economic pressure, what we're feeling today. And gonna feel in the next few months.

If enacted, this bill would reduce fuel cost by approximately a dollar 8 per gallon, saving the typical family of four $1,100 per year. The goal here is simple, to give California some breathing room now, while legislators work towards a long term energy and transportation solutions. I've heard directly from hundreds of California residents in Senate District 36 about how the high gas fuel prices are impacting their everyday lives. In their words, I'm gonna share with you their stories. Constituent number one.

Quote, I'm a senior living on fixed income and I really need this relief. Especially now since gas prices are predicted to go even higher. Constituent number two, they are now spending so much on fuel that they're cutting back on groceries and basic necessities just to afford commuting to work. Constituent number three. Another describe how fuel costs have become one of their largest monthly expenses, forcing them to reconsider whether they can continue to operate their small business.

These stories are not isolated. They reflect a broader affordability crisis affecting families across the state of California every day. I have two posters in front of you, that I wanna draw to your attention. In visual number one poster, model three, California gasoline prices estimate include regulatory cost. The first model shows the impact of California regulatory structure on gasoline prices.

This is our impact of of our taxes and regulations alone, not involving external factors or disruptions. This first model also shows California gas prices would have continued to increase due to the following factors. Cap and invest compliance, the low carbon fuel standard, state fuel excise tax, and other regulatory programs that increase fuel cost. The take takeaway is straightforward. Even with the global oil markets when the oil global markets are stable, California's gasoline prices are significantly higher than the national average.

California gas prices will continue to rise. Envision number visual number two poster, possible California gasoline price estimates. Our regulatory environment has reduced domestic production and in the process of closing refineries, which has made us dependent on foreign oil and fuel. This leaves us vulnerable to extreme crisis, like the one that we're facing today in Iran. The second visual illustrates possible gas prices ranging for California under short term global disruptions.

What this chart shows is that a global oil market disruption alone can push gasoline prices significantly higher even before factoring in the California specific regulatory cost. According to the model, California gasoline prices can range roughly between $6 to approach $9 a gallon in this short term disruption. In other words, California consumers are exposed to two layers of pressures. Global oil price volatility due to over reliance on foreign oil, and state level regulatory cost. Any one of these two pressures can alone create huge burden of, on California.

When those two pressures combine, California will experience dramatic spikes at the pump, which is what's happening now- happening now. This is why I'm proposing a temporary relief from state imposed cost driving. It is so important. So Californians are not hit with both global price spikes and state regulatory costs at the same time. Members, this bill is about affordability.

It's about immediate relief for California families. My bill is the only mechanism to give motorists relief at the pump today. We need to work on short term, mid term, and long term solutions. Californians are struggling with rising costs, and this measure offers practical, immediate relief at the pump. Today, I respectfully ask your aye vote on Senate Bill 1035 to give immediate relief at the pump, which is what the affordability will help us with the affordability crisis that we have right here in the state of Cal- excuse me, in the state of California.

And with those reasons, I ask for your aye vote. I do have a witness to testify who's an expert in this field.

Okay. Great. You're welcome to begin when ready. You have two minutes.

Thank you so much, Madam Chairman. And thank you, senators for the opportunity to be here today. My name is Michael Moshe. I'm an associate professor at the University of Southern California, and I appear before you today as a private citizen. Prior to joining USC, I was a consulting partner for KPMG and a financial analyst on Wall Street.

I hold BS and MBA degrees in finance and economics with honors from New York University and MS in federal taxation from Golden Gate University and an advanced certificate in AI from MIT. I come today at the invitation of Senator Strickland and I have received no compensation for my appearance here today or preparation. Most assuredly senators, I am not bankrolled by Saudi Arabia and I am not a secret agent for big oil. California is confronting a gasoline crisis. Let's take a look at the statistics.

Oil production has declined 75%. Oil and oil imports have increased 866%. Refinery production is down 22%. And gasoline price today is 46% higher than the national average. Now oil and gasoline represent 8% of our economy but more significantly it's the first 8% of our economy.

If you don't get the first 8%, you don't have jet fuel, you can't make crops, you don't get the other 92%. And irrespective of Iran, gasoline prices are at risk and California gasoline supplies are at risk. Now the markets and prices will adjust. They always do. But by how much and how fast?

Those are the essential questions. So in summary, if you believe that high gasoline prices and perhaps even shortages of gasoline are in the best interest of California, then we are on the right path. Do nothing further and let it deteriorate. Alternatively, if you think as I do that high prices are detrimental to consumers and especially those with lower and fixed incomes, then it's time for us to consider a different path. Thank you so much.

I'm looking forward to a constructive conversation today and I'm here to help as much as I can. Thank you, madam chairman.

Well, thank you very much. Any other witness in support? If you'd like to express, me too support, go ahead.

Sean Wallentine from the California Independent Petroleum Association representing 300 independent oil and gas producers, service and supply companies, and royalty owners throughout California In strong support of the bill. We're independent producers, who provide California with crude oil per barrel at a $6 per barrel discount over all the barrels brought here on supertankers from around the world, which are polluting their way to our shores and endangering our coastlines as offshore, mobile source supertankers are dangerous coming into our ports. We provided them pipelines directly to the refineries at no, there's no pollution, no greenhouse gas emissions, and we produce it right here in places like Kern County. It's less expensive, less impact. We wanna provide it to local gas stations, which will reduce gas prices at the pump. So we're thankful to you, senator, and all of you for working hard to keep prices down at the pump for Californians.

Just a question for the witness for the gentleman who just spoke. Is there anything in this bill that specifically helps the domestic production or is it just across the board?

This bill is, just to be honest, Senator, this bill, it would directly help consumers at the pump. This this bill doesn't specifically help SIPA drill more wells or or or produce more crude in California, but we're certainly behind any bill that's going to reduce prices at the pump and and create stability within the fossil fuel market in California.

So, Senator, if I might add, if you might

Wait.

So If I I might add

Yeah. But let's just have the the the others who are gonna express me too and then you can start going back and forth. Alright. Okay. Thank you for thank you. You you are basically a second witness as if you were sitting there. Yeah. Thank you. Okay. Anybody else in the room wishing to express support, please come forward at this time. Okay. Nobody else? So senator Strickland, if you wanna make a quick point, but then

Well, I I just wanna on that on that point.

On that point. Look, I think the the person testifying is absolutely correct. But those are mid term, long term solutions that we need to do for domestic production which I support, which I think would help grow our economy. But people are feeling the pinch right now. And people are having to decide between a gallon of milk and a gallon of gas.

Yeah.

And there's not much that we can do to collectively as a legislature to drop prices immediately. And this is one of the only options that we have. And this is the option that would drop gas prices by a $1.08 a gallon, 1,100 per family. I do think we need to work on that and that's why we asked the governor to go in emergency session. Because this this issue is not gonna go away.

This is only a temporary and I always say this bill is only temporary. That's why it's a year. Right. Because we need solutions.

Yeah. I think we should get to the other commentary and then we can have the back and forth.

Okay. So, are there any opposition witnesses wishing to come forward? We have room for two of you here and you're welcome to proceed when ready.

Sure.

Hi, Chair Blakespear and Members of the committee. Thank you for the opportunity to be with you today. I'm Sam Wade, Vice President of Public Policy with the Renewable Natural Gas Coalition. We represent over 300 member companies selling renewable natural gas in California, and I'm here today in opposition to the portions of SB 1035 pertaining to the low carbon fuel standard. We agree with the committee analysis that this bill would create a fatal pause for the clean fuel industry.

If the low carbon fuel standard was suspended, investor confidence in California's overall support for the transition to clean fuels would be decimated. The LCFS is a cost effective and proven method of meeting our greenhouse gas goals. The program works well because it is technologically neutral, geographically flexible, and open to private sector innovation. As a result, since 2011, it has delivered the cleanest fuels at the lowest cost to California consumers while avoiding any significant impact on conventional fuel prices. Because of the LCFS, RNG growth in California has occurred rapidly.

California now has the greatest total number of RNG projects of any state, 235 projects across food waste diversion, landfills, wastewater, and agricultural activities. It would be a tragic irony if California was to suspend its primary program to transition off of conventional fuel due to short run swings in the price of oil caused by the conflict in Iran and other geopolitical factors unrelated to clean fuels. With respect to global leadership, there are other states working to follow California on LCFS. Four state level programs are in place and eight in active development. Canada has a program both nationally and provincially in British Columbia inspired by California.

Those efforts would also be harmed significantly if California fails to stay the course. We recommend against any LCFS programmatic changes currently, recent LCFS market uncertainty created in part by extended deliberations both at CARB and here in the legislature, has weakened the investment thesis for private capital trying to help achieve California's goals. We need to refocus on stabilizing incentives to invest in climate action, including clean fuel and fully embrace the LCFS as a key tool. Thank you.

Thank you. Mister Dunn?

Thank you madam chair, members of the committee. Keith Dunn here on behalf of the State Building Construction Trades Council. I didn't bring any props, but I'll be happy to provide each and every one of you over the two statewide elections in which the voters of California endorsed spending attacks on fuels to invest in their roads. Let's remember these projects not only fund careers within the union and nonunion construction workforce, but also provides critical safety projects that every citizen that travels in California to work to school to pick up your children depends upon every single day. Starting and stopping those is a more dangerous impact to our economy than to anything else.

I would also offer that this is not the only solution. We need to stop trying to drive out our refining interests here in the state of California by continuing to look at opportunities to drive that business out of state. I'm gonna have the opportunity later in this session to talk in each and every one of you about the problems with the continued push to drive refining out of the state. But the suspension of the gas tax has been rejected twice. Once when it was passed, once when it was tried to be recalled.

The voters want this because they understand that our infrastructure is the key to the economy. I appreciate the the affordability discussion. But I would tell you that having fuel produced elsewhere with no labor standards, no environmental impacts is a greater threat to our economy than a simple reduction that's gonna pull out of the general fund which, you know, right now we're at a struggling portion of our budget. We have a lot of priorities. It's not an appropriate use to go and backfill this with the general fund at this time.

Again, happy to provide each and every one of you with the results of two state wide elections in which the voters of California decided what they would like. With that, I'm happy to answer any questions from any of you moving forward.

Okay. Thank you. Anybody else wishing to express opposition, please come forward. State your name, organization, and position.

Mikhael Skvarla here on behalf of the California Hydrogen Coalition, in opposition.

Chair, Members, Brian White on behalf of Pacific Merchant Shipping Association, respectfully in opposition.

Madam Chair, Chris Micheli on behalf of the California Renewable Transportation Alliance in a respectful opposition. Thank you.

Madam Chair and Members, James Thuerwachter with the California State Council of Laborers in strong opposition. Thank you.

Madam Chair and Members, Matt Cremins on behalf of the California Nevada Conference of Operating Engineers. We unfortunately did not get our letter in, but we are in strong opposition.

Madam Chair and Members, Carlos Gutierrez here on behalf of the California Advanced Biofuels Alliance and Clean Fuels Alliance America, in opposition.

Michele Canales with the Union of Concerned Scientists in opposition.

Good morning, Madam Chair and Members. Scott Cox on behalf of CALSTART, The Electric Vehicle Charging Association, Valley Clean Air Now, and Ceres in opposition, and registering opposition on behalf of my colleagues at Cal ETC at their request. Thank you.

Good morning. Jennifer Roe with Capital Efficacy on behalf of the California Hydrogen Business Council in opposition. Thank you.

Thank you, Madam Chair and Members. Don Schinske on behalf of the Low Carbon Fuels Coalition in opposition.

Hi. Good morning. Ryan Kenny on behalf of Clean Energy and the Bioenergy Association of California in opposition. Thank you.

Chair and Members, Nate Solov on behalf of Zeem Solutions in opposition. Thanks.

Bill Magavin, Coalition for Clean Air, opposed.

Okay, thank you. Alright. Well we will bring it back to the committee now and I'll just make a few comments. So, I appreciate the efforts of the Senator but I'm not gonna be able to support this bill today and I wanted to take a moment to explain my position. So I wanna start by saying that like all of us here in the legislature, I do understand the pain that high fuel prices are causing for Californians.

Even for the small segment of Californians who don't rely on a personal vehicle to get between their jobs, their home, and the rest of their life, it is more expensive to do anything when fuel is more expensive. So that means, goods that they use are more expensive in addition to transportation. And I also know that as state legislators, we work to do right by our constituents and to respond to the challenges they're facing. Sometimes those challenges are caused by things that are in the state's control and sometimes they're not. Trump's disastrous war in Iran is obviously causing a huge amount of pain at the pump.

And I hope to see that resolved as soon as possible. But I also know that this is entirely out of control of the state. I appreciate the Senator's bill focusing on things that are within the state's control, but I can't support this approach. As the committee analysis notes, although the, although altogether Cap and Invest and LCFS add about 38¢ to the price of gas. And I don't wanna minimize the real impact of the 38¢ per gallon.

But this is only a relatively small part of the overall cost of a gallon of gas that consumers are facing today. And those 38¢ per gallon, there it's not going to the oil companies or to Petro States. It's helping the very same people who are struggling with those high gas prices. Cap and Invest puts a lot of money directly back into disadvantaged and low income communities. It funds things that include housing, transportation, air monitoring, CalFire.

To date, there has been 5.87 billion invested into disadvantaged communities and 3.32 billion invested into low income communities. I also want to mention that if we don't deal with the climate crisis, if we don't reduce our carbon emissions and prevent the globe from continuing to warm, we are all going to be living or not living on an uninhabitable planet. Somehow this seems to get lost in the conversation because we seem to forget why we're doing these policies. It's also worth noting that a portion of the bill suspending the state gas tax was already considered, as mister Dunn referenced, twice, being roundly rejected by voters in 2018's Prop 6. I'm proud of California voters for voting 57% in favor of keeping the gas tax.

And that's because they want to improve our roads, as was mentioned. Our constituents understand that the programs and services that the state provides offer very real benefits and they sometimes do come with costs. So they don't shy away from that fact in Prop 6. And I don't think we here in the legislature should shy away from it either. So again, I'm not able to support this bill today.

I know that getting through the fossil fuel, clean energy transition, this mid stage transition is going to be difficult. And it will require a lot of weighing of different trade offs. But to me, doing irreparable damage to California's two biggest climate programs, which provide numerous benefits to everyone in the state, residents and workers, in order to grant one year of relief from a small portion of the price of gas is not a trade off that I support. We need these programs to help California move forward in the future and not to be stuck relitigating the arguments of the past. So I'll, turn to my colleagues if you'd like to make any comments.

Senator Menjivar.

Senator, for the past year, I've been hearing you talk about Prop 36. The will of the voters, the will of the voters which would fund Prop 36. Prop 6 was the will of the voters to not overturn the gas tax. We've heard that from the opposition as well. You've been so adamant about the will of the voters. Can you explain why this shift?

Yeah. There's a major shift since Prop 6 joined us. We're in a crisis situation here in California that was not here during Prop 6. We just lost Valero and Phillips 66, 20 percent of our oil production.

And I don't see how it's good for the environment, that we now get all our oil from India, which will the way they they don't have the same environmental standards that we do and that we're getting refined oil from India. I would remind you that we have now, I think only 6, 5 refineries left that do California formulated gasoline and almost relying completely on foreign oil. We by the way, you when you said, you know, Trump, we called, we saw this coming, we asked the governor go in special session well before the war in Iran. When we have the 20% reduction and quite frankly, it's projected that there might be more further, reductions in production here in California. And when you rely on foreign oil, things like what's happened in Iran is exactly what we're facing.

So what's being projected, at the beginning of the year was $8 a gallon of gas. Everybody thought that was crazy. Well, in some places, especially in Southern California, in your district, I believe, last night I was on Spectrum, they had a $9 gallon in in San Fernando Valley, in Chevron. So it's much different than what we had proposition six, what, a few years ago. We're in a crisis situation now.

And I virtually I would virtually say that if today we put that same initiative on the ballot, you wouldn't have the same result because now we're facing $8 a gallon of gas and it's even projected with the war in Iran that it could go up towards $10 a gallon of gas. So I would ask my colleagues, when they see those seniors on fixed income and when they see those college students living paycheck to paycheck, they can't afford these high gas prices. Why we're now, not willing to lower the gas prices by a dollar to help with that relief.

And, Senator, you know, the opening of your response to my question were on things that have nothing to do with your bill. I mean, your bill is not gonna help decrease the the transportation of foreign oil coming into California. Correct. And in those issues, you're even having some environmental champions even being sympathetic to those issues. You know, your your next the next author in this committee has an issue that you're gonna have environmental champions voting for because there's a clear connection to that.

But in this, in removing LCFS and I brought this up in the in the previous presentation by Senator Niello where we're we progressed to address the air pollution, and it's gotten better because of programs like this. So if we continue to trip away from this. We're gonna go back to having a California state with one of the worst smog that we ever saw, when when you were growing up in the San Fernando Valley, in in LA. So we need these programs to ensure that while people are struggling with, yes, groceries and so forth, because I'm not gonna take away that that's valid, they're not also gonna be struggling with not being able to get care for health knowing that we're also stripping away some of the health care affordability in the state from federal impacts and state impacts. So I'm wondering given I know I know that the crisis has gotten worse.

Inflation has gotten worse.

And it's gonna get worse even from today.

And it's gonna get worse until we-

gonna get a lot worse.

Until we do something about it. How how do you outweigh reduction of funds for necessary improvements of our infrastructure?

Well, I happen to believe I happen to believe and we could agree to disagree without being disagreeable. I think it's important that people could put food on the table. I believe it's important that people can eat. I believe it's important that people don't have to decide between a gallon of milk and a gallon of gas. And I think that's why you're seeing, actually, candidates who are campaigning around the state.

People like Antonio Villaraigosa and Matt Mahan are also calling for suspension of the gas tax because it's one of the only things that we have in our tool chest that lowered the prices today. Now I agree this bill and I open with this bill is not the solution to all the problems. This bill is just to help with the the crisis that we face today. And to answer your question again, going back to the initiative, I believe that initiative was out there today, especially with the projections that we're starting to see. When your constituent gonna come to you come September, October and it's $10 a gallon of gas, not only $10 a gallon of gas, but gas shortages where you're gonna go to a gas station, there's not gonna be gas available.

We need to go in emergency session, I believe, last January. But we need to start talking about those mid term, long term solutions. But this is the only thing that you could tell your constituents that you did and you fought for to lower gas prices today. We don't have other tools that would have that opportunity to lower the prices today.

We do if we invest in clean energy.

That won't happen today.

Not today. Not today. That's an investment for long term.

We can agree to disagree. But today, people are struggling to put food on the table. I think people would want to prefer to a small suspension in order to make ends meet and be able to put food on the table and I have to decide between a gallon of gas and a gallon of milk. That's my argument. We could agree to disagree without being disagreeable.

But I think the economy right now, my district is probably one of the more high influential districts based on salaries or based in my district, poll came out. 50% of people are worried about living paycheck to paycheck. That's happened in my district. I can only imagine what's happened to every district across the state of California. And I would remind you, high gas prices fall disproportionately on those hard working California families, those seniors and the fixed incomes, those young people who are just graduating college.

And I also remind you, high gas prices increase the cost dramatically of products that we have like groceries. And we have a we all agree that we have affordability crisis in California. I've heard Democrats and Republicans say that in this building. And if we don't pass this, we're going the other way in terms of affordability for hard working California families.

Okay. Thank you. Senator Allen, were you wanting to say anything? You don't have to. Okay. Okay. We will we'll bring it back to you to close. Oh. Oh. Oh. The Vice Chair hasn't gone yet. Okay. Okay. Sorry.

So, well first of all, thanks for bringing this, this bill forward. Californians do not need another excuse. They don't need another explanation. They need relief today. They need relief now.

We have the highest gas prices in the nation and every single Californian feels it every single day. But we made this decision out of this legislature to create a system that is fragile, that is volatile, so that when we globally fill these price hikes, Californians are hit hardest. And right now, families are just being asked to absorb it. And they can't. So yes, I support this temporary suspension of the gas tax.

I think we can walk and chew gum, support this relief at the pump for Californians, and fully fund infrastructure. But the point is, people need relief today. But here's a real question here. Why are Californians always the ones paying more at the pump?

And when are we gonna fix it? That's the deeper question here. This is about a solution that we need now, but we have a longer debate that has to happen. So I have a question, for doctor Moshe. And I I have about three or four questions for you. But the first is really about our global dependence. Can you walk us through why something like the Strait of Hormuz matters to California? And why we're and where we're actually sourcing our oil and gas from today in California?

Yes, I would be happy to walk you through that. So California is the most dependent of all 50 states on foreign oil and now we're the most dependent on foreign gasoline sources. Even though we have some of the largest reserves in The United States underneath our feet. Now California oil, the number one source for a number of years has been The Middle East, Iraq, Saudi Arabia, UAE.

That's changed in the last couple of years. We still have a lot of oil coming in from Iraq but we're bringing more oil in from South America places like Brazil, Ecuador and Guyana in particular. However, our gasoline is being sourced primarily from three nations, India, South Korea, and The Bahamas. Now India gets its oil to make gasoline that comes to California from Russia is their primary source. Iraq, Kuwait and The UAE.

Well Iraqi oil, UAE oil, Kuwaiti oil go through the Straits Of Hormuz. There's only three ships that have gone through the Straits Of Hormuz. The ship traffic has gone from 138 ships a day on average to about three. So the oil supplies that would go necessarily to South Korea and India are are are slowing down considerably. Which means their refineries to make California gasoline, which is of course the special blend.

There's a limited number of refineries in the world that make California gasoline. Their feedstock to make gasoline is depleting at a fairly significant rate. And that in turn will slow down production for California gasoline and of course now we got to get it on tankers to get it over here. So that's why the Straits of Hormuz are so important and are reliant on Middle Eastern oil and now Middle Eastern generated gasoline is so important.

It's interesting, you know it's it's sort of serendipitous in the sense that because we get a lot of fuel from India, India's primary supplier of oil to make that fuel is Russia. And so in in a in kind of a strange way we're supporting the the Russian foreign policy and things like that. So is that sufficient for question number one?

Yes. Thank you. Okay. So just to level set here though, California which used to produce the vast majority of our own oil is now increasingly relying on foreign sources and shipping routes. And meaning that instability halfway across the world can raise prices for us here locally. That's that's a fair takeaway.

That that is. And and and and and it was if I may, that was pointed out by me in in many papers over the years and also, Vice Chair Gunda in his response to the governor talking about the complexity of supply chains and the vulnerability of California. And and noting, quite honestly, in in support of of some of my early, modeling that California gasoline prices would be 8 to $10 a gallon if it had not been for the imports.

So then if we're tied to global markets, then how tight our supply really becomes critical. And based on your analysis and and current modeling, can you tell me how many days of gasoline supply does California actually have right now?

Hard to tell but the best estimates range between fourteen and seventeen days.

And so what does that mean?

Well based on current consumption rates, given the amount of fuel that's available in the system, feedstocks that are available in the system, refinery capacity, all things being equal if you stopped imports of oil and you stopped imports of gasoline you have about sixteen to seventeen days. Now the interesting aspect of that is around twelve days and and I believe the CEC will will support this. We have what's called the hockey stick effect.

I think we're gonna need to get back to the plot here which is the bill. So, yeah. So can we refocus on that?

So Madam Chair, my point in this questioning is so that every Californian understands the critical moment we are in right now. It's not, We're gonna be facing shortages. Prices are gonna go even higher. And this is the most meaningful thing we can do to relieve people today and for the next year. And it's important that people understand what we're looking at.

That's the intent of my line of questioning here. So if I'm hearing you correctly, we're losing state refineries right now. We're gonna be in a in a place where we're experiencing shortages, and that ultimately means what? Fourth prices.

Increases in gas prices in in most of the statistics indicate to us that about twelve days, thirteen days, it's almost an automatic dollar increase per gallon. Almost automatic.

Okay. I think that this moment in California's energy crisis is critical. And I think we can walk and chew gum. We can relieve, the gas tax at the pump right now and fully fund our infrastructure. But it's gonna take political will. It's gonna take prioritizing the needs of Californians. And it's gonna take supporting this bill. Senator Strickland, Thank you.

Okay. Thank you. Senator Allen.

Yeah. I agree it's gonna take political will. I mean, part of what's frustrating, I think, about this whole situation for so many of us is that, you know, our colleagues, friends in Congress have been unwilling to even do the most modest of of rule of of of assertion of their own sovereignty against this president in in in, you know, in the wake of of this bill that of this war that he's launched, without any congressional authorization. You know, in addition, when we took steps to try to create more transparency in the oil refining process to better understand these gas price challenges, Our our friends in those sides out didn't didn't support those efforts. So there's a lot of political will I think we need to, you know, engender at this moment.

You know, I I think we we do see greater coalescence from both Democrats and Republicans about the need for more environmentally friendly, labor friendly, in state production. That's part of why we passed legislation last year that was focused on trying to make it easier for there to be production in Kern County and elsewhere. I I I think we could do more in that direction, especially in those oil fields that are far from frontline communities. So as to address some of this disparity that exists. I don't think anybody is particularly happy with this reliance on all this international import.

We all know that there's a massive environmental impact associated with just even shipping the oil here and let alone the extraction procedures that they, go by, the labor standards, etcetera. So I I actually think there's some coalitions here. I mean, it's interesting we're talking so much about our dependence on on international imports. One thing I do, you know, one thing that CIV and others will will say over and over again is you talk to economists. It's not so simple as just resetting the balance.

You know, there there this is a global market and these prices are set. They're, you know, set by by global supply trends and everyone is seeing gas prices spike regardless of all over the world, regardless of whether the extraction is happening close to them in a in a significant way or not. And and that's because of the disruption associated with this war. And unfortunately, the president is not even able to get close allies to assist in, in freeing up the the Straits of Hormuz to make the the the flow of oil easier through there, because of the way that he's approached foreign policy.

And I just I hope that my colleagues will also, join in, in calling out, this president and and your and your colleagues and friends in Congress who have just stepped back and and really, I mean, from my perspective, I've advocated it their responsibility in in our system of shared governance. So, you know, with that, I I I'm I'm I share the concern about the extent to which this bill as conceived would would dramatically impact a a large number of infrastructural projects that actually impact our constituents bottom lines as well. One of the reasons why we got so much support for fixing the roads and the bridges and everything else is because we were actually able to show how much an average Californian is spending on car repairs because of how lousy our roads are. And it was so inexcusable given how much weather is. When you saw how much more our folks were spending on car repair versus other parts of the country where-

where there's much tougher weather conditions and yet our roads were in such bad shape that that the potholes and the cracks and the rivets and and all all the issues that that folks felt face just driving around town. I experienced in my own district. It puts your car at risk and and we knew we needed to get those those issues fixed because, you know one bad- you know one bad drive could could be a financial disaster for somebody as well. So, you know, there are a lot of competing concerns here with regards to affordability. I I appreciate what you're trying to do, senator.

I don't support the way you frame this bill, but but I I will say I I appreciate the conversation, including the conversation about the straight forward moves, not just because I think it's important for people to be focused on some of the international implications and and all the implications associated with this war. But I also think that there is I I am sensing an increased commitment as reflected in last year's legislation for us to both, you know, continue to double down on clean energy, which of course would make us less, incredibly less reliant on all these international dangerous international trends in a particularly volatile region in the world, The Middle East. But also more, you know, a careful but concerted effort to to do more oil production in the state, you know, as long as it meets high labor and environmental standards. We know we can do it. There's a way to do it.

That that effort has been started last year with our our, you know, unleashed current legislation that I I see Senator Grove here and I know that she was you know, she'd been talking about this for a long long time and I appreciate the advocacy she's brought to this issue with regards to the the negative impacts of of of of imports. So with that, I I just I think there's opportunity for us to kinda work do some work together, You know, and I appreciate the fact that you've repeatedly brought up the the the fact that we are so reliant on on on foreign imports.

So, Senator, I'm looking forward to work with you on many of those things.

Let let's move this into your close

to answer.

No I-

Okay.

Yeah. Answer and close.

Let me do that and then I'll go to my close. So, Senator, I appreciate a lot of what you said. And we're gonna work on a lot of the things that you've just mentioned. Hopefully, get off of foreign oil. But I'll get back to that in my close. But when we talk about the Federal Government, you're absolutely right. It's global market. We have a war. But you look at the prices in Florida, what they're paying. We're almost double.

Look at the prices around the country and other than Nevada and and Arizona, which rely on us. And in fact, there was a scathing letter sent to Governor Newsom from the bipartisan letter from the Governor of Nevada and the Governor of Arizona because we're now disrupting their economy. Yes. It is global market. Yes.

The war does affect it. But nowhere near to where we are because of our reliance on foreign oil. And then I would just remind everybody here, go look in the East Coast when it costs a gallon of gas. We would kill for that here in California. That's number one.

Number two, I couldn't agree with you more on infrastructure. That's why the way I frame this bill, because I think infrastructure should be one of the top priorities that we invest in. No one's fought more. I was a leader in Prop 42 that took that money and dedicated to infrastructure when we talked about the gas tax. And I was part of that in prop 42.

I've been working a long time with construction trades. I firmly believe that should be one of our top priorities. So we we agree on that. But where we are today is a crisis, and this is in my close. This is a crisis situation.

I don't think a lot of the people in this building understand what we're facing. That's why we've been talking to some of the experts. What we're facing is gonna be so dramatic. Think about then replay this hearing come September, October, and find out and it's probably gonna be sooner than that. We're talking $10 a gallon of gas.

$10 a gallon of gas. If we're lucky to have gas. I remember what it was like as a little kid, I'm a little bit older than a lot of you. I remember what it was like to have gas shortages. Go in to the gas station, wait long lines, and then right when you get there, they put a sign up saying we're out of gas. I remember that vividly as a 5-6 year old.

But is this is this bill gonna solve gas shortages?

Hold on.

Hold on. No. No. But this is I'm I'm I'm framing where we are. $10 a gallon gas and shortages.

So $10 a gallon gas. We're talking right now, affordability crisis before we face that gas. And everybody here contends and knows high oil and energy and gas prices fall all throughout the economy including our grocery costs. So we don't have much in the tool shed right now to help people who are facing this and facing this very soon to see our constituents. Our constituents are already in pain before this happens.

And so this is why I brought this bill forward. This is why it's a short term solution. We could work on some of those long term solutions. But when your seniors come talk to you when it's $10 a gallon of gas and they're on a fixed income, You're gonna say, well, I had an opportunity to lower a dollar a gallon but I said no. You're gonna go to those young people who just graduate college, live paycheck to paycheck, who can't afford these high gas prices.

And when you have the opportunity, you're gonna have to tell them I didn't take that opportunity. When you go to those hard working California families living paycheck to paycheck, deciding between a gallon gallon milk and a gallon of gas. You're gonna have to say, I didn't take that opportunity to lower these gas prices by $1.08 a gallon. We have a lot to do, in the short and long term, but I'm asking you today to vote for my bill because we are in a crisis situation and we're seeing a bigger crisis situation. We already agreed as Democrats and Republicans that this year, affordability is a crisis facing all of us.

Well, what we're projecting here or what I'm trying to tell you today is gonna get a lot worse. And this is one of the only opportunities we have to lower gas prices today. That's why I asked for your aye vote.

Okay. Thank you. So we have a motion from the Vice Chair which is do you pass to rev and tax. And committee assistant, please call the roll.

Senators Blakespear? Valladares? Valladaras, aye. Allen? Alan, no. Dahle? Gonzales? Hurtado? Menjivar? Menjivar, no.

It's one to two. We will keep it on call.

Thank you, Madam Chair.

Thank you. Thank you.

Thanks, Members.

Now we have our last bill, which is SB 1039 from Senator Grove. It is her birthday. Sure this is right where she wants to celebrate with all of us.

Thank you for that, Madam Chair. That was very kind of you.

Well, you're welcome. The birthday girl can start when ready.

Thank you, colleagues. Thank you. I'm here today to present SB 1039 which establishes a clear evidence based process for refinery fence line monitoring to ensure that requirements are practical, facility specific, and focused on pollutants that refinery can actually emit. So just repeat that again to focus on what the refinery can actually emit. I wanna start by saying that I accept the committee amendments to clarify the process for identifying facility specific pollutants.

And I appreciate the consultants working with my office and willingness to be able to, amend our bill to make it better. California has some of the most, stringent air monitoring requirements in the country, if not in the world. Refiners are required to operate both community air monitoring systems and fence line monitoring systems that provide real time publicly accessible data. SB 1039 does not, I repeat, does not roll back any of those requirements. Community monitoring remains in place and transparency to the public remains in place.

And the public access to data is unchanged. What this bill addresses is the gap in how these requirements are being implemented. In some cases, facilities are required to monitor pollutants that are not even generated by their operations. My witness here today is a small refinery in Bakersfield, California and under the fence line monitoring program, he does not- he does not produce a number of those constituents that he's required to monitor for, which increases his cost. SB 1039 creates a formal process for refiners to provide substantial evidence to their local air district to exclude those pollutants from fence line monitoring requirements.

The bill also establishes clear criteria for when the pollutant may be excluded, including when it does not released. It is not released through the routine or non routine operations, and real time monitoring is not techno technologically feasible, or where there are other valid, technical jurisdictions. We also wanna directly address the concerns, and the bill undermines air quality protections. It does not. SB 1039 strengthens the system by ensuring monitoring requirements are grounded in actual emissions and supported by evidence.

When monitoring is not tied to real emissions, it can impose significant costs without improving the public health outcomes. These systems cost millions of dollars upfront and hundreds of thousands of dollars every year to operate depending on the size of the refinery. When requirements go beyond what the facility can actually emit, those unnecessary costs do not disappear. They're absorbed through the business and ultimately plastron through the supply chain. SB 1039 ensures that monitoring remains protective of the public health while being practical, technical technological feasible, and tailored to each facility.

Today with me to testify is the president and CEO of San Joaquin Refinery in my district, Cyrus Mojibi.

Welcome. You can begin when ready. You have two minutes.

Thank you, Madam Chair. Chair and members of the committee. My name is Cyrus Mojibi and I'm the President of San Joaquin Refining Company in Bakersfield, California. SJR is one of the oldest continuing operating facilities in California. Our facility began operating in 1939 and has been family operated since 1968.

We produce very little transportation fuel and no gasoline. Instead, we refined heavy Kern County crude oil into specialty petroleum products such as asphalt for road paving, industrial lubricants, transformer oils for electrical infrastructure, agricultural products, and other products that support a wide range of industries. Our scale, processes and environmental footprint are dramatically different. Our refinery processes 100% California produced crude oil. Specifically heavy Kern River crude produced in Kern County.

Nearly all the crude we process comes from within 25 miles of our refinery. That means the oil is produced locally, transported locally, refined locally, and then distributed to markets across the United States and around the world. This is one of the most localized and efficient petroleum supply chains anywhere in the world. From the time crude oil enters our refinery to the time it leaves as finished products, the process typically takes 45 days. However, regulations such as Senate Bill 674 treat all refineries as if they are large transportation fuel producers.

When the legislature originally established refinery monitoring requirements, local air districts were given the authority to tailor those programs to the refineries in their jurisdiction. Our local air district recognized that our refinery does not produce many of the chemical constituents required under the monitoring program and initially reduced our scope accordingly. That decision was later overturned through litigation from environmental groups, forcing the full monitoring framework to apply even where those compounds may not be reasonably present. The result was a dramatic increase in cost. Original estimates of $300,000 ultimately became over 2,000,000 in capital investment with approximately 200,000 per year in ongoing maintenance costs.

While SB 674 isn't the issue before the committee today, it also illustrates a larger challenge facing refineries in California. Over the past decade, California refineries have faced a layering of environmental regulations, reporting requirements and operational mandate.

If you could please wrap it up.

I will. I was told at four minutes so I got.

We only have one. Oh, okay. Okay. Okay, go ahead.

Thank you Madam Chair.

Each rule may seem reasonable on its own, but together they are forcing refineries to close. When closures occur, occur, demand for oil products does not disappear. Instead, production simply moves out of the state or overseas, often to facilities operating under less stringent environmental standards. My hope is that California can continue pursuing environmental progress while also ensuring that the cumulative weight of regulation does not impose unnecessary hardship on the very industries and residents that keep our state's economy and infrastructure functioning. Because once refining capacity leaves California, you know as well as I do that they won't return.

Thank you.

Okay. Thank you very much. I hope you had the time you needed. Yeah. Okay.

Thank you, Madam Chair.

Yeah. Okay. Anyone else wishing to express support, please come forward.

Sean from the California Independent Petroleum Association in support of the bill. And just so you know, Cyrus, he's the state expert on, what's the special oil for electricity? Transformer oil. You've all heard of it.

You cannot conduct electricity without transformer oil. And his one refinery in Kern County makes 90% of all the transformer oil in the state of California. And we really need his his refinery to stay healthy, and that's why we're supporting this bill. We produce crude oil in California, and the only off taker of our crude oil are refineries like his and the others that remain in California. So anything that increases their cost or might jeopardize their health is critically important for us to look at because we really need them to remain healthy.

So, in support of the bill. And happy birthday, Senator.

Okay. Thank you. Anybody else in support? Okay. Opposition witnesses, please come forward. And you each have two minutes. You're welcome to begin when ready.

Madam Chair and Members, Brendan Twohig on behalf of the California Air Pollution Control Officers Association. That's the air pollution control officers from all 35 local air districts. Air districts working in close coordination with, the community and also with, refinery operators and- and owners. Carefully design, develop and install, operate and maintain, air monitoring systems to provide meaningful information to the public and protect communities. The, monitoring programs are developed through our local air districts local rule process, that concludes robust public participation, from both the community and refinery operators and owners.

Through that process, we there has been, the district rules and associated guidelines allow for, they're already designed to focus on monitoring on refinery related pollutants, and they also do not require monitoring for substances that cannot be generated by a facility. And should an owner or operator of a facility, believe that they're being inappropriately required to, monitor for a pollutant in question, those rules, already allow for a mechanism for that to take place. So, we think the bill is is unnecessary. I think that, you know, some of the assertions made here today, you know, I'm not, you know, I would encourage maybe more, coordination and collaboration with the local air district on those issues. Because I'm sure they have their own perspective as well as to some of the things that were said.

I would say as far as the amendments go, we find those highly problematic because I think there was an attempt maybe to- to maybe try to codify existing guidelines. We have various air districts that have refineries. There are some nuances contained in those guidelines for the exclusion mechanisms. And, just an initial review of- of what's in those amendments, it appears there's discrepancy between what we have in place and what's going into the bill. So there's some question now, how does that impact our current rules?

And then going forward, we may have to come back to the legislature if we get new information and need to update guidelines in order because- because you fixed it in statute, we may have to come back and run a bill through the legislature which is not only impractical but it's gonna impede our efforts to protect communities. So we're opposed. Thank you. I appreciate it, Madam Chair.

Thank you. Go ahead.

Good after- Good morning, Chair, Members of the Committee, and hardworking staff. Thank you for the opportunity to provide comments today. My name is Alex Loomer, and I'm here today representing Earthjustice, A non profit public interest environmental law organization that uses law and the strength of partnership to protect people's health, our environment, and to combat climate change. We're here today in strong opposition of SB 1039 but nevertheless wish the author happy birthday. Communities have been working on implementation of refinery fence line air monitoring requirements for almost a decade.

This has included the need to file lawsuits to remove unlawful air district exemptions that allowed for some refineries to avoid compliance. Despite being sources of air pollution and engaging in inherently dangerous operations that can result in explosions, fires, and other incidents. Between 2021 and 2024 alone, there's over 300 incidents at California refineries, including flaring events, pollution releases, and fires, sometimes resulting in shelter in place orders, worker injuries, and major pollution releases. For these reasons, real time fence line monitoring is critical to inform nearby communities and regulators of the necessary actions to take. We have filed an opposition letter detailing our concerns with the bill.

Unfortunately, the committee's proposed amendments do not address our concerns. These proposed amendments are necessary and redundant at the processes that already exist at the air district level to allow refineries to exclude certain pollutants from monitoring. It's unclear what problem this bill is trying to solve and how passage of this bill is intended to change the current regulatory system. There is no need to change state law. Air districts should be able to require and not require monitoring as they feel is necessary to protect public health and safety.

As Brendan pointed out, codifying the process that already exists at the air district level means that any changes that any changes to the process could require local air districts to come back through the state legislature rather than the air districts in consultation with affected communities and refineries dealing with at the local level. This outcome cuts out communities from the process and creates implementation delays that can threaten public health and safety. For these reasons, we respectfully urge you to hold the bill in committee. Thank you.

Okay. Thank you. Anybody else wishing to express opposition, please come forward.

Sure. David Quintana on behalf of the South Coast Air Quality Management District. We have not finalized our position yet but we wanna let know we share many of the same concerns that, CAPCOA put forward.

Good after- or good morning. Marie Lu representing, the Central California Environmental Justice Network and the Asian Pacific Environmental Network both in opposition and also with permission expressing opposition from the San Francisco Baykeeper Center for Environmental Health and 350 Bay Area Action. Thank you.

Bill McGavin with the Coalition for Clean Aero Post.

Gabriela Facio on behalf of Sierra Club California and in California Environmental Voters in opposition. Thank you.

Michelle Canales with Union of Concerned Scientists in respectful opposition.

Okay. Thank you. Okay. We'll bring it back to the committee now. And I'll just start with a couple of comments.

I am recommending we pass this bill out of the committee. And I- I want to thank Senator Grove for what you're working on here, which is essentially to make sure that we're practical as we're implementing our environmental laws. For petroleum refineries specifically, it is important that we're monitoring the appropriate pollutants that are emitted from these facilities. And that's for safety and health reasons. And also recognizing that not all refineries are the same.

So having, a different approach to refineries that have meant different things. To me that makes sense. But I do want to say that the air districts do already have a process that accounts for this. But this is the first committee for this bill. And I am aware of the concerns that are expressed by the opposition and the concerns from the air districts.

And so I encourage the author to continue working to figure out that specific sweet spot of where it is that we need improvements to the current system. That the air districts already have the authority to exclude certain things for having to be monitored. Because we don't want to undercut the discretion of the air districts. But- But I do recognize that it's important that, we have appropriate refinery fence line monitoring systems. And, so I will be recommending that we support this bill today. Thank you.

May I respond?

Sure.

So, just so you know, the- the app- the- my witness here, did go to the local air district board and did prove with a beyond a shadow of a doubt that, they did not produce, I think, out of the 21 constituents, correct me if I'm wrong, six are the only ones that they produce so they shouldn't have to monitor. The Air District Board did accept that and made a ruling that they would be exempted from those additional exemptions. And then they filed the- some of the EJ groups filed a lawsuit against the air district, and then they reversed their decision.

So I get that there is a process, but the process isn't working. My witnesses' refinery produces after Benicia has closed the- which is kind of scary because they're a very small facility in Bakersfield. They're not anything like a major refinery. They're a small facility. They produce the majority now of all the asphalt that we'll be using our inner roads for the roads infrastructure and repair that like we just heard about the how important our roads are.

They also produce transfer oil, which you can't have the electricity generating, green energy stuff without it. And ink oil. So pens, t shirt printing, things like that. So they're not a refiner of gasoline. And so they don't produce those emissions or those- those constituents that are qualified under the air monitoring system. Just a response to your- thank you for your support too, madam chair.

Yes. And thank you for providing that, additional context publicly because it does help, to understand what problem we're solving for to that question that was asked.

Thank you.

Yes. Senator Menjivar.

Senator Grove, does your bill undermine, reduce protections against fence line monitoring of the communities?

No. It does not. It only requires refiners to, monitor for what the product they get will actually, admit. So for instance, my witnesses refinery is about 45 miles. Right? From how long is the pipeline? From the field? Four miles. So it's four miles from the field. It comes from the field. It's underground. It goes right into his facility. So there's no air emissions. It's like really close in the supply chain.

And then he produces these things that we just talked about. Asphalt, a small amount of diesel, transfer oil, ink oil. And then he monitors for 21 constituents. And it cost him about $200,000 a year to do that. But it doesn't stop him from having to monitor for what he produces or what can be produced from that cons- constituents that can be produced for what he does. But why make him test for stuff that he's never gonna admit because he doesn't produce those things?

So in this example, this said, refineries being held accountable-

for what they produce and ensuring that they're protecting, in this case, 21 constituents.

Yes.

There are refineries in this state that do produce more constituents whether it's 15 or 20 or 21. They are still required to monitor for those- those constituents because they produce a product that can release those constituents.

But it doesn't sound we're lowering the threshold.

No. We are not.

To the opposition, the bill- the committee amendments, which I really appreciated, is saying that you can only move forward with this if the local AQMDs approve- prove this with options that have been used in the past. One of your statements was that it's removing your ability to protect communities. But if we're allowing these said facilities to utilize the options that AQMDs have already provided, how are we not protecting the communities?

The amendments, the way we read them are an attempt to codify the guidelines air districts have already developed. And those guidelines might have some, might vary to some degree by air district, but that's because they're developed with specific sources in mind to allow this flexibility. So the- the bill no longer, at least the amendments that I saw, no longer even has that language about not monitoring for a, pollutant that is not emitted. What the amendments attempt to do, I believe, as- as we read them, is to attempt to codify existing guidelines. So I'm not sure how you're- you're really- you've made any progress on this concern that- that the witness has provided in any meaningful way.

And so when I say it restricts our- our ability, is that when you fix the guidelines in statute, now you, in order to change those guidelines or if we deviate from them in any way, we're possibly going to have to come back to the legislature.

I mean, they won't be able, I think we might be reading the committee amendments differently. Because yes, it's codified starting guidance that have been used to process examples. That's one. And the second thing is one of the options is if they don't produce that pollutant and you determine it- determine it, it can be determined in fact they don't produce that pollutant, they're exempt from monitoring that.

And the current guidelines allow for that?

So why are we upset if we're just codifying the current guidelines?

We're not codifying the existing guidelines. That's my- I- I was clear- clear to say that there's an attempt to codify the existing guidelines. If you overlay existing guidelines at the various districts with what's in this language, there's some- some discrepancies already.

Okay. So because before I thought we heard you're attempting to codify but now it's- it doesn't match exactly apples for apples.

And and I don't think it can either because like I said, you have multiple air districts that all have mechanisms for allowing the exclusion of- of certain pollutants. But there is gonna be some variation depending on the sources they have. So they have to craft their- their guidelines based on that. Thank you. I mean I think it's really about, I don't want to go too much here but, you know, this is something where these issues obviously are highly technical and are something that should really be dealt with by the experts at the local level through, you know, with the- with- with- with the expertise that's associated with- with the people working on this.

But the local officials are still gonna have the final say. Her bail won't be able to move forward without the local approval.

Yeah, but it says that- that you may exclude a pollutant if there's substantial justification for any of the following. And then it lists A, B and C. So right, but that's- that's also limiting as well. It's just these items and if there are other criteria or you get new information that are necessary, that would be excluded.

Can I say something?

And I think that you know Senator Grove to the Chair's point, you know if in ongoing conversations, if new information is brought about, maybe there's a way to look at how you also include that in- in- in determining. But from what I read, it seems like there's avenues to both protect the community, which I'm always gonna be up in arms about. But also not put additional regulations on a entity that is not responsible for said pollutant. I felt like it was a good balance.

You're absolutely spot on, ma'am.

I- I no longer have a question.

Can I say something?

Does it- Do you want any more? No? Okay. No. Sorry. Sorry. Okay. Any other? Yes, Senator Allen.

Well, yeah. I'm- I'm a little torn here. I- I- I mean, I understand this enjoys a first of all, I think I understand that the goal. I'm also understanding how this could jam up aspects of the work of the Air Board. So I look, I- I- I can only imagine this is- there's a lot of these issues are gonna be worked out if this bill is able to proceed.

My- My- My desire here is to lay off quite frankly because I'm concerned about getting these issues resolved. But I understand the intent of the bill and I'm certainly open to supporting it if- if- if necessary, if the bill is struggling to get out of committee today. But I think it's gonna- I'm gonna- I'm gonna be asking more aggressively about some of these concerns that have been raised by the opposition. So I- I understand you've been engaging in good conversation with the chair and enjoys the chair's recommendation. And I- I- I see what you're trying to get at, senator.

That being said--

I appreciate that, sir. I appreciate your comments and I appreciate the fact that you would support the bill if it's struggling to get out of committee. The whole purpose is to highlight the fact that we have a necessary product that all of Californians need. 'Kay? We need asphalt. We need ink oil. We need transfer oil. We need fuel. Now, he is not a fuel re refinery.

But his refinery does not- It's a small refinery right off the freeway in 99. And he does not produce or his facility does not produce any of the constituents that he is required. Not all of them. Sorry. He reduces them. That he's required. So to when you look at his compliance costs from correct me if I'm wrong. 800,000?

In 2012, our total environment- environmental compliance costs were around $400,000

And what is it today?

8 and a half million. That's just for--

Every year. So the increased cost and that's not just fence line monitoring but this is what we're talking about today. That why should he pay an additional 3 to $500,000 a year for something he will never ever produce? That's the issue that my bill is addressing. And it's giving the air and then with the chairs amendments and the committees amendments, it's allowing the air boards to still have a participation and get the final say so.

His intent- His dad started this, became the president's physical. He came from Iran, was a janitor, moved up to the president, and now it's family owned. And it has been since 1960 something.

Can I ask the opposition witness just that your answer to that that point about kind of culpability, responsibility? We obviously want you to be empowered to protect the air. But this- this- this- this respo- this culpability question.

I think that's what we have right now. Yeah. We- We have that flexibility right now. And I- And frankly from what I've heard for the district, and I don't want to really speak for them specifically, right. We have you know, 35 air districts in the association.

But, I think they would, likely have a much different view about some of the things that are said here today. It's my understanding that they are not requiring monitoring for pollutants that are being admitted- emitted. So that's why I encourage maybe there should be more interaction with the- with the local air district.

We can send you an invoice and show you how he has for this. I don't mind doing that at all.

Well, Senator respectfully, I mean, I would- I think that the appropriate, you know, people to have those discussions with and really drill down on your concerns also would be the local air district.

Thank you.

Because I mean I asked these questions specifically to them and- and you know what I got back was that you know they are not requiring monitoring for pollutants that aren't emitted.

I can provide you the exact pollutants that were--

Well again, I'm not- I'm not a technical person. So for me to be here and try to get into this level of detail and be this granular is really, you know.

Okay. Question?

Yes. So just to bring it back top lever for me and then I'd love for you to respond to some of the topics that came up. So we keep on saying here in California that we want cleaner energy and I agree with that goal. But what we're doing right now is not a transition. It's a shutdown.

And your company is feeling it at most. We are layering regulation on top of regulation. We're driving up costs. We're pushing out in state production and quietly increasing our dependence on fuel and oil. And that's been a reoccurring thing for the last couple of weeks.

I'm glad we're shining a light on- on what's really happening in California. This bill, though, is very intent about, outcomes. And, I appreciate the author bringing it forward. But I have some questions for you, but there- I think there's been a lot of back and forth that you've been eager to weigh in on. So if you could take a couple of minutes to address some of the local- the issues about local- the issue about the intent of the language, I would appreciate that.

Thank you Madam Vice Chair. So I actually agree with a lot of what my counterpart has said here that this was a somewhat rational bill. 674 has passed. And they put in a rational way for it to be administered by sending it to each local air district. We then had a rational conversation with our air district and came up with a rational plan to administer it.

And then of course, we're sued, they were sued by fanatics that disagreed with it. And then, I don't blame them for this, but they're forced to go back to the old plan. So over the course of four years, we went from a plan that was agreed to that only made us test for the constituents that we do produce. And now I'm back to producing more than double the amount because eventually, they have to give in to these lawsuits that continue to get filed- filed at them by environmental groups. And so it worked until they got they got sued.

So I think the point of this bill is to give us the ability to prove that we don't make benzene, toluene, ethylbenzene, Xylene, all the chemical constituents that come from gasoline because we don't produce gasoline. So I think it existed and I think our air district acted in good faith to implement that. But then they get sued and I don't blame them for this. They can't fight every single legal battle they get and it went back and got deferred. So I disagree respectfully with the idea that I can just go to the air district because that's what we did.

And they agreed and then we got sued back into submission.

So, I want to bring this back to affordability. Can you walk us through the actual cost and logistics of installing and operating fence line monitoring systems at your refinery?

Sure. Absolutely. So originally, our plan, I think it was 2020, we had it first established with the air district, was one single point monitor and one path. So there's point monitors and there's paths that certain distances to line to measure for constituents. That scope was about $300,000 And then we were gonna test for sulfur dioxide, nitrogen dioxide, naphthalenes, hydrogen sulfide.

And then the lawsuit happened and we ended up going back and we ended up with three points and three significantly longer paths. One of them going north to south along Highway 99, which I'm sure every one of you has had the joy of driving the 99. It's a 150,000 cars per day, mainly gasoline driven cars that the fence line monitoring points are about 50 feet from the highway. Cause we butt right up to Highway 99.

So I think there's a lot larger chance of false positives, which I would argue are a greater threat to the public. To get- To get BTEX, that's the acronym for benzene, toluene, ethylbenzene, Xylene. To get false positives on, constituents like that than from my facility.

So, and though I mean, ultimately those costs just don't disappear. They get passed on to the consumer.

Yes.

So can you walk me through what happens to supply, to prices, and to our fuel economy if a refinery like yours shuts down?

Yes. So again, we- we only produce a little bit diesel fuel. But- But we are, once Valero closes down, we will be the largest producer of asphalt in the state of California. We are also, as the gentleman from CIPA said, we are 85 to 90% of the state's supplier for transformer oil and 25% of the national supply. Transformer oil is an oil that goes into every transformer pad mounted and pole mounted.

That helps the cooling and insulation of transformers. It helps the conductivity and lubricity of electricity through the lines. Should the state reach the electrical mandates that it desires to achieve, you would probably need another half dozen refineries like me producing transformer oil to meet the transformer oil needs for a fully electrified grid.

And Vice Chairs, there are some members who need to leave. So if we could try to wrap it up.

I'm all done. Thank you.

Okay. Okay. Okay. Thank you. We'll hand it back to, Senator Grove to close.

Thank you, Madam Chair. And I appreciate your committee and you working with me on this. I appreciate the amendments who I think make- I make a lot of sense. I think both consultants agreed as well and just respectfully asked for an aye vote.

Okay. Thank you. Okay. Thank you. There's a motion from the Vice Chair, which is, do you pass as amended to Senate Appropriations? Committee consultant, please call the roll.

[roll call]

It's 4 to 0. So that and the bills on call, that means it gets out.

Thank you. Thank you, madam chair. Thank you, members.

Okay. So, we should go through the bills for those who haven't been able to vote on all the bills yet. So should we start with number one? SB872? What oh, right. Okay. So we're on, SB 872 and we need a motion. Okay. Senator Hurtado moves. And the motion is do passed as amended to Senate natural resources and water. And this is by Senator McNerney, s b 872.

[Roll Call]

It's five to zero and that bill is out. So now we'll move on to bill number two which is SB 887 from senator Padilla. Do we need a motion on that? Moved. Okay. That bill has already been moved. So we could call the absent members.

[Roll Call]

That is 4-1 and that bill is out. Okay. Onto item number three. This is SB 981 from senator Nilo. So moved. We have a motion from the vice chair which is do passed to appropriations.

[Roll Call]

Three to one. Okay. It's three to one. And reconsideration is granted. We're now on to item number four, which is SB 1,008 from ... Ochoa Bogh. Please call the roll.

[Roll Call]

Five to zero. That bill is out. Next we have SB 1035 from Senator Strickland.

[Roll Call]